Estonian shopping centers reduce shadow economy

TALLINN (BNS) - An explosive growth in the number of shopping centers over the past 12 months has reduced the share of the "shadow economy" in Estonia by at least 160 million kroons ($8.5 million), the statistics department estimates.

The volume of the shadow economy, the loose collection of markets and wholesale shops that include budget goods of varying quality, was estimated at 2.36 billion kroons in the second quarter of 1999 as compared with 2.20 billion kroons a year later. The difference is 160 million kroons, a drop of 6.6 percent year on year, the daily Postimees reports.

As late as seven years ago the shadow economy accounted for about 14 percent of gross domestic product. But in recent years its share has stood at about 12 percent and in the second quarter of this year it dropped to 10 percent.

Erika Sisask, head of the statistics department's macroeconomics division, told the daily the share of the shadow economy has primarily declined on account of trade. "Mushrooming shopping centers win over clients from markets," she explained.

The markets' biggest rival is the Saastumarket (Saving Market) chain that stakes on low prices at the cost of limited choice of goods and relatively modest trading environment.

Saastumarket CEO Maldar Maesalu said it's natural that customers are turning their backs on markets as the ever-growing competition has stopped the rise of prices in shops and even reversed it, making them comparable with markets.

"People used to shop in the market until now because goods were cheaper there, but now they can buy goods at the same price in shops where they can rely on quality," Maesalu explained.

The development of shopping centers in Tallinn has been especially fast in the past 12 months, with half a dozen large malls and numerous major shops added to the existing ones. More are scheduled to open within the next few months.

Speaking for the market research company EMOR, Ulle Parnoja said surveys show indeed that people have begun to shop in shopping centers rather than in markets and that the reason for this is evening of prices.

Although studies show a drop in the popularity of markets, they continue to attract numerous customers.

Peet Kall, manager of AS Combinent, which runs Tallinn's Kadaka market, said there are no signs of the market's turnover declining. "Trade goes on as before," he said.

Kall declined to answer questions about changes in the share of the shadow economy in the market's turnover. "The shadow economy seems to be more of a problem of the Statistics Department," was all he said.