Post on 12-Nov-2014
description
Edmunds Rudzitis
Julita Varanauskiene
Triin Messimas
SEB Baltic Household Outlook October 2012
Edmunds Rudzitis Income, Spending and Sentiment
3
6
9
12
15
18
21
1Q082Q083Q084Q081Q092Q093Q094Q091Q102Q103Q104Q101Q112Q113Q114Q111Q122Q12
Latvia (adjustments from 1Q2011 according Population Census)
Lithuania Estonia
Unemployment (job-seekers) rate* (%)
* Persons aged 15-74 Source: National Statistics
-16%
-12%
-8%
-4%
0%
4%
8%
12%
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
Latvia Lithuania Estonia
Changes in employment (%, Y-o-Y)
Source: National Statistics
22.10.12 3
Economic growth means more jobs
• Estonia posted the biggest increase in employment – in the 2nd quarter by 3.6 per cent y-o-y. In Latvia and Lithuania employment grew by 2.2 per cent and 1.4 per cent respectively.
• Unemployment is decreasing due to both job creation and emigration.
• The share of long-term unemployed persons are close or above 50 per cent, reflecting structural problems in labour market.
22.10.12 4
Uneven wage growth
Average gross wages and salaries (%, YoY)
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
Source: National Statistics
Latvia Lithuania Estonia
Real wages (%, YoY)
-12%
-8%
-4%
0%
4%
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
Source: National Statistics
Latvia Lithuania Estonia
• In the 2nd second quarter the average gross wage in Estonia reached EUR 900. It was by 32 per cent larger than in Latvia (EUR 684) and by 44 per cent higher than in Lithuania (EUR 624).
• Households in Estonia and Latvia have experienced improvement in the purchasing power, while in Lithuania real wages remain on a downward trend.
Changes in amount of transactions at POS terminals (1H2012 compared to 1H2011)
0%
10%
20%
30%
40%
Localmarket
Abroad Localmarket
Abroad Localmarket
Abroad
LV LT EE
Source: Central Banks
Household spending support economic growth
Source: National Statistics
Latvia Lithuania Estonia
Household consumption expenditure (%, YoY)
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
22.10.12 5
• In Latvia and Lithuania growth of consumption expenditures was faster than disposable income increase. Explanations: quite large share of shadow economy and improvements in consumer confidence.
• Payment card statistics shows more rapid increase in household consumption.
• Due to lower prices households are willing to buy goods abroad, incl. in the online stores.
22.10.12 6
Only in Latvian consumers don’t lose their temper
• Estonians and Lithuanians are more concerned about future due to European problems and increasing expenditure (prices).
• Latvians’ optimism is fueled by increased purchasing power and national economy achievements
Source: Eurostat
Expectations about household's financial situation and general economic situation in the
future (September, 2012)
-25-20-15-10-505
Latvia Lithuania Estonia
Household financial situationGeneral economic situation
Latvia Lithuania Estonia
Consumer sentiment index
-30-25-20-15-10-50
August
Septem
ber
October
November
December
January
February
March
April
May
June July
August
Septem
ber
2011 2012
Source: Eurostat
22.10.12 7
To spend or to save?
Energy prices are increasing. This heating season expected to be the most expensive.
• In Riga and Tallinn heat prices would rise by 20 per cent year-on-year this autumn while in Vilnius heating price is likely to increase by 9 per cent.
• Only Estonians intend to spend less and to save more.
Source: Eurostat
Intentions to spend more and probability to save (September, 2012)
-50
-40
-30
-20
-10
0
Estonia Latvia Lithuania
Intentions to spend more on big ticket purchase
Probability to save
Julita Varanauskienė Household financial assets
Deposits per capita (Eur)
1980
25863126
2026
26523410
0
1000
2000
3000
4000
Latvia Lithuania Estonia
June 2011 June 2012Source: Central Banks, National Statistics
Deposits keep growing
22.10.12 9
• The growth is conditioned by increasing income of households
• Households prefer safe and stable place for their savings/assets
• Precautionary motives are still important
Term deposits lose their appeal…
Preference of deposits without maturity to term deposits signal about: � plans to spend money in the
nearest future
� waiting for momentum to invest money elsewhere
� lack of interest to earn interest
Latvia Lithuania Estonia
30%
35%
40%
45%
50%
55%
60%
2011 2012
Deposits without agreed maturity share
Source: Central Banks
22.10.12 10
…due to decreased interest rates
22.10.12 11
Real deposit interest income (12 month lagged interest rate on 1 year maturity deposit in
national currency less annual inflation)
-15
-10
-5
0
5
10
15
20
2005 2007 2009 2011 2013
Estonia Latvia Lithuania
Source: Central Banks, National statistics, SEB estimations
Cash holdings are increasing
Different sizes of cash holdings reflect: � different size of shadow
economy � different level of penetration of
financial services � different level of trust in financial
institutions
Growth trend in all three countries reflects weaker motivation to keep money in deposit accounts
22.10.12 12
Latvia Lithuania Estonia
Cash and deposits ratio
0%5%10%15%
20%25%30%35%
2008 2009 2010 2011 2012
Source: Eurostat
Triin Messimas Household Liabilities
Household debt to GDP (2011)
Source: European Credit Research Institute
1825 25 25 27 29 30 35 37 42 44 46
52 53 53 56 56 57 6270
76 80 81
96 99
131 132
0
20
40
60
80
100
120
140
RO LT SK BG SI CZ HU PL LV IT EE AT EL LU FR DE BE FI MT IE SE ES PT NL UK CY DK
The level of household leverage in all Baltic countries on reasonable levels
22.10.12 14
• At the end of 2011 the household debt to GDP was in Estonia 44%, in Latvia 37% and in Lithuania 25%.
• The level of deleveraging depends on the rates of credit expansion before the crisis. Estonia and Latvia had one of the highest credit growth until 2007.
81% 84% 79% 81% 69% 79%
11% 9% 12% 12% 14%
9% 8% 8% 8% 8% 16% 12%
0%
20%
40%
60%
80%
100%
120%
2008 IIQ 2012 2008 IIQ 2012 2008 IIQ 2012
Estonia Latvia Lithuania
Other loans Consumer loans Housing loans
Structure of household loan portfolio
Source: National Central Banks
The stucture of household loan portfolio resembles the one of the Northern EU countries
22.10.12 15
� The share of housing loans in total loan portfolio of households has increased in all the Baltic countries and has reached 80 per cent or above.
� In the Northern EU countries the share of housing loans make up ca 75 per cent, in the Southern EU countries ca 70 per cent and in New Member States ca 60 per cent of the total loan portfolio
Households continue to decrease their liabilities
Estonia Latvia Lithuania Source: National Central Banks
Changes in consumer credit portfolio, Y-o-Y
-30%
-25%
-20%
-15%
-10%
-5%
0%
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Exclusion of loan portfolio of Snoras Bank
22.10.12 16
• At the end of second quarter in Estonia and Lithuania the volume of housing credit decreased at 1.5 and 1.6 per cent year-on-year, respectively, while in Latvia the speed of deleveraging has increased to 11.2 per cent
� Since the beginning of 2012 the deleveraging of consumer credit has slowed down in Estonia and Lithuania.
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Estonia Latvia Lithuania Source: National Central Banks
Changes in housing loan portfolio, Y-o-Y
Households experience most favourable mortgage interest rates
Majority of the housing loans are related to Euribor rate that is at historically low level: in Sept 2012 at 0.48 per cent.
The average interest rate of housing loans in EUR in June 2012:
� In Estonia 2.9% � In Latvia 3.5% � In Lithuania 3.2%
6-month Euribor interest rate (%)
0
1
2
3
4
5
6
01.0804.0807.0810.0801.0904.0907.0910.0901.1004.1009.1010.1001.1104.1107.1110.1101.1204.1207.12
Source: European Banking Federation
22.10.12 17
Households continue to improve their living conditions
22.10.12 18
• There is a slow trend from flats towards houses in all Baltic countries. Still the share of flats is far above the EU average,
� Households have been increasing their living space but it is still below the one in the Western Europe (ca 40 sq m)
66 68
58
41
65 65
57
42
0
10
20
30
40
50
60
70
80
Estonia Latvia Lithuania EU 27 countries
2005 2010
Share of population occupying in flats (vs. houses)
Source: Eurostat
27
23 22
30 27
25
30
27
0
5
10
15
20
25
30
35
Estonia Latvia Lithuania
1999 2009 2011
Useful floor area of dwellings per capita, in sq m
Source: National statistics
0
4
8
12
16
20
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Eurostat European Union (27 countries) Estonia Latvia Lithuania
Gross investment rate of households
Households would need to increase their investment rate
22.10.12 19
• The investment rate of household sector is below the EU average that is 9%: in 2010 it was 7.6% in Estonia, 3.8% in Latvia and 3.5% in Lithuania.
� In Estonia the investment rate peaked at 17.6%in 2006 while in Latvia the peak was in 2007 at 8.2% and Lithuania in 2008 at 6.2%.
In the Baltic countries the home-ownership is one of the highest in the EU
85,5 84,1
93,1
70,7
0
20
40
60
80
100
Estonia Latvia Lithuania EU 27 countries 2010
Share of population in owner-occupied accomodation
Source: Eurostat
• As a result of the privatisation process most households own their housing.
• The highest home-ownesrhip is in Lithuania (93%), in Estonia it is 86% and in Latvia 84%. The EU average is 71%.
� Hence, housing is an important asset of households and developments in the real estate sector impact households directly
22.10.12 20
22.10.12 21
So far - better than expected • Employment has increased
• Real wages have grown
• Employment growth and rising wages have supported private consumption • Spending abroad has outpaced the rise in domestic spending
• Households have increased their net financial worth • Short term deposits were losing their attractiveness, holdings of cash were
increasing
• The fall of loan volumes is slowing down and households benefit from historically low Euribor rates
• The households should invest in order to increase the useful floor area of dwellings
Questions?
Edmunds Rudzitis, SEB Latvia Julita Varanauskiene, SEB Lithuania
Triin Messimas, SEB Estonia
22.10.12 22