Companies save for tough times ahead

TALLINN - Director of the Estonian Institute of Economic Research Marje Josing stated that company profitability has increased as enterprises are trying to prepare for upcoming difficult times, reports National Broadcasting. The Statistics Board reported on Dec. 7 that consumer prices had risen by 4.2 percent in the year-on-year comparison in November – prices of goods and services grew at a similar pace.

Estonia’s base inflation (the price growth without fuel, tobacco and food and alcohol) was higher than the euro area average – in October, the price growth in the euro area was 1.6 percent, while in Estonia it was 2.7 percent. This means that local enterprises are also contributing to the increase in prices.

“The latest statistical indicators demonstrate that company profitability rates have grown. Entrepreneurs are acting in a rational manner – when the confidence level is lower and it can be predicted that Estonia is facing difficult times, they are trying to collect a buffer, the so-called layer of fat. During the economic depression, profits fell very low,” said Josing.
“However, the principle of increasing profits rather than wages cannot last long, as this would crush any hopes for the recovery of the domestic market; individuals will vote with their feet and will eventually move away to Finland,” she explained.