Baltics

June 2011

GDP DEVELOPMENT – Exports continue to drive recovery across Baltics (1/2011 y-o-y growth: Lithuania 60%, Estonia 58%, Latvia 51%). Estonia is estimated to be best positioned for recovery as its public finances are impeccable (6,6% public debt and 0,1% budget surplus in 2010). Latvian exports are back to their 2008 peak but domestic demand remains depressed. In Lithuanian retail and construction sectors have begun to support growth since 2H/2010 but skills mismatch is again starting to be a challenge as skilled personnel in transport, IT, textile and food processing are in short supply.

GDP DEVELOPMENT - Estonian GDP growth is forecasted to be 5,0% in 2011 and the average growth until 2020 is expected to be 3,5-4%, while at the same time productivity is to increase from 70% to 80% of EU average. Lithuanian GDP is prognosed to grow 4,0% in 2011 and the Latvian 3,7%.

SALARY DEVELOPMENT – After crisis times salarycuts and stagnant salary growth thereafter, wage expectations are again growing in Estonia. In a survey conducted in Q2/2010 39% of job seekers were prepared to work for a gross monthly wage of 799 € or less, while in Q3/2010 the share of such respondents was 50%.

INFLATION - Estonian consumer prices increased in March y-o-y by 5,1%, while the increase in Latvian was 4,1% and 3,7% in Lithuania.

EXPORTS – Lithuanian exports and imports increased in March 2011 by 47 and 43.4%, respectively y-o-y. While at the same time Estonian exports grew by 71% and imports by 45% y-o-y.

COMPETITIVENESS - Estonia was ranked the 33rd most competitive nation in 2011. Lithuania was ranked 45th, while Latvia was not included in the list.
EXPORTS - Latvia's exports and imports increased by 51% y-o-y and 37% y-o-y respectively in January 2011.

CAR SALES - Latvian new automobile registrations growth of 161% y-o-y in March 2011 was the fastest in Europe. The second and third steepest increases were registered in Lithuania (119%) and Estonia (87%).

CREDIT RATING - Moody's raised Latvia's rating outlook to positive indicating that Latvia is on the right track to economic recovery.

RETAIL SALES - Retail sales grew in Estonia by 9,5% y-o-y in April and in Lithuania by 7,3% being two of the three fastest developing countries among EU area (EU27 average detail growth 1,9%). At the same time Latvian detail sales dipped by 1,1%.
MINERALS - U.S. based Molycorp paid 62 M€ to acquire Estonian rare metals company AS Silmet.

ENERGY - Fortum organized financing for building a 70 M€ waste-to-energy heat and power plant in Klaipeda.

PHARMACEUTICALS – Valeant Pharmaceuticals International, Inc acquired AB Sanitas for 314 M€.

REAL ESTATE - East Capital acquired Laulasmaa Spa, which has 150 rooms and 13 ha of land with more than 400 m of beach line.

REAL ESTATE - Ratos AB paid 116 M€ to acquire Finnkino’s movie operations in Finland, Estonia, Latvia and Lithuania.

WOOD INDUSTRY - Latvijas Finieris will invest 17 M€ to its Veneer factory in Estonia during the next three years.

TELECOM - Axa and Resource Partners investment funds will buy cable television and electronic communication provider Baltkom, which has offered to buy 100% of cable television company Izzi.

ENERGY - Estonia-based wood pellet producer Graanul Invest has raised 34 M€ financing from EBRD to build two biomass based electricity and heating combined stations in Estonia and Latvia.

ENERGY - Hitachi, GE Nuclear Energy and Westinghouse Electric Company are interested in being co-investors in Visaginas nuclear power plant.

March 2011

INFLATION - Inflation forecasts for 2011 were raised for Estonia to 3,7%, Latvia 3% and Lithuania 2% due to higher commodity prices.

UNEMPLOYMENT – Latvia’s has EU’s 2nd highest youth unemployment of 39% followed by Estonia at 37,5%. The overall unemployment in Latvia was 20,1% and 18,6% in Estonia.

ECONOMIC FREEDOM – In the 2011 Economic Freedom ranking Estonia ranks 14th, Lithuania 24th and Latvia 56th.

BUDGET DEFICIT - Lithuania's central government budget deficit narrowed to 7,8% of GDP in 2010.

INDUSTRIAL PRODUCTION – Estonian industrial production grew by 23% during 2010 mainly due to external demand although domestic demand also increased during the year.

RETAIL TRADE – Lithuanian retail trade turnover grew in 01/2011 by 3,6% and Latvian by 0,1% y-o-y while Estonian decreased by 3,9%.

BANKING - The European Investment Bank will sign a 45 M€ lending agreement with the UniCredit Leasing, thus helping it to SMEs in the Baltic states.
CAR SALES – 1 161 new cars were sold in Estonia in 01/2011, which is more than two times y-o-y.

RETAIL - Finnish Citycon bought 42 600 m2 Kristiine Keskus shopping centre in Tallinn for 105 M€ from Italian owned Pro Kapital.
ENERGY - Eesti Energia will buy two 300 MW oil shale power plants worth 950 M€ from French Alstom.

ENERGY - Outotec has signed a 20 M€ agreement with Eesti Energia on design and delivery of a new oil shale preparation plant in Estonia.

IT - Baltic IT sector decreased by 3% in the1H/2010. Out of 20 largest companies 11 experienced a decrease in revenues. Exigen Services (Latvia) led the ranking with 8,6 M€ revenues for 1H/2010. Webmedia Group and Baltic Data Center stand at the 2nd and 3rd positions with 6,9 M€ and 6,3 M€ revenues.

ELECTRONICS - South Korean LK Technology will invest 30 M€ within next 4 years into a 100 employee LED lighting assembly plant in Lithuania.

LOGISTICS - Estonian BLRT Grupp bought with 20 M€ a former metals plant plot in Riga where its subsidiary Elme Metall will open its kargest logistics and services center.

WASTE MANAGEMENT - Ragn-Sells laid the cornerstone 15 M€ waste fuel plant in Tallinn. The plant with yearly processing capacity of 120 000 tonnes will be completed by the end of 2011. Ragn-Sells will also build in the same location, with the help of 1,25 M€ EU support, a bio-waste recycling complex.

BANKING – Latvian GE Money Bank is looking for an investor. The bank is on sale due to it not being able to fulfill its goals. GE Money Bank posted 23 M€ losses in 1-9/2010.

AUTOMOTIVES - The Estonian government will buy 500 electric cars from Mitsubishi and build a national 250 station charging network, which will enable to charging the car battery to 80% within 30 minutes.

AUTOMOTIVES – Japanese car Windows producer Pilkington Automotive will invest 9 M€ in a new plant. Another 25 M€ will be spent by a real estate developer cooperating with Pilkington.

December 2010

GDP GROWTH - Estonian economy expanded 4,7% in Q3/2010 thanks to export of manufacturing industry products. Latvian GDP rose 2,7% in Q3/2010 – first y-o-y growth in 10 months. For the whole year Latvian GDP growth is forecasted to be -1% and for 2011 3,3%. Lithuanian GDP grew 1,1% in Q3/2010, which was faster than expected thanks to construction output growing for the first time in almost two years.

UNEMPLOYMENT - In Q3/2010 Estonian unemployment rate fell from 18,6% to 15,5%, which is close to 14,6% registered in Estonia in Q3/2009. Latvian unemployment in 11/2010 was 14,3% with Riga being best off with 11% unemployment and Latgale province in Latvia worst off with 22,1% unemployment. In Lithuania Q3/2010 unemployment rate grew to 18,4% from 14,4% y-o-y.

CORRUPTION - Estonia was ranked 26th, Lithuania 46th and Latvia 59th in the latest Corruption Perception Index, which measures public sector corruption in 178 countries.

COMPETITIVENESS - Estonia is the 33rd most competitive country in the world, according to the new competitiveness ranking (Finland 7th). In comparison with last year, Estonia improved its ranking by two places. Lithuania climbed four places to 47th, while Latvia fell one place to 70th.

CREDIT RATING - Fitch upgraded Latvia’s rating outlook to stable from negative due to improved financial and economic conditions. The agency reaffirmed Latvia's long-term foreign currency rating at BB+. FOREIGN DIRECT INVESTMENTS - In Q2/2010 Lithuanian FDI flow was 105 M€ negative whereas the flow of other capital investment was 143 M€ positive.

TAXATION – In the global Paying Taxes 2011 survey Latvia ranked 81st out of 183 countries with 38,5% total tax rate, Lithuania 83rd with 38,7% and Estonia 134th with 49,6%. Out of the Baltic countries, Estonia was the only one with higher than EU average of 44,2% (Finland 44,6%) total tax burden on companies. However, in Estonia taxes are not paid from profits retained in the company.

INFLATION - Prices in Estonia have gone up by 12% in average in three years since 2007 - notably more than the EU average of 7%.

WAGE DEVELOPMENT - Gross monthly wages rose 0,9% in 3Q/2010 y-o-y, the average monthly gross wages were 759 € and the hourly gross wages were 4,6 €.

ESTABLISHING A COMPANY – From 2011 it is possible to establish an Ltd in Estonia without owners equity.

NEARSHORING - Statoil ASA Fuel & Retail unit will invest 270 M€ into setting up its financial services center in Estonia. The center will manage the group's financial assets and liquidity as well as provide loans to other units. Estonia was chosen as the location due to a well-developed financial and information technology infrastructure, favorable business and tax environment and euro entry.

FINANCIAL SERVICES - Western Union will in Q1/2011 officially open its service center in Vilnius, where it will during the next five years invest 8,6 M€ and create around 200 jobs.

ENERGY - German and Polish companies have confirmed their interest in building a 400 M€ power station in Liepaja, Lithuania, while seven more companies have expressed possible interest in the project.

ENERGY – Graanul Invest, Estonian producer of wood granules, is planning to invest into building five combined heat and power plants, each with 5-8 MW electricity capacity and 12–20 MW heating capacity. The first plant will be erected in 2012 in Valga County.

ELECTRONICS - Ensto has opened a 10 M€ factory in Tallinn, which doubles the company's production volume of thermoplastic enclosures for electrical switchgear. The factory exports 99.5% of its production outside of Estonia.

WOOD INDUSTRY - Stora Enso invests 10 M€ in pellet production at the Imavere sawmill in Estonia. The pellet plant construction will commence in Q4/2010 and the plant is expected to be completed a year later. Stora Enso already produces pellets at four sites in Sweden and Russia with total annual capacity 310 000 tons.

WOOD INDUSTRY - Södra has in the past couple of years been purchasing forest and agricultural land in Estonia and Latvia as the company sees investments to the Baltic States very profitable. Södra owns 15 000 hectares of forest and agricultural land in Estonia and in Latvia 9 000 hectares. Södra owns land via Södra Metsad and Södra Mezs, which have a book values of 22 M€ and 9 M€.

MACHINERY INDUSTRY - Mekanotjänst Industrier acquired with 0,8 M€ Felistra’s practically new plant in Tartu and is re-equipping it to process sheet metal. Felistra was an Estonian window producer which went bankrupt 2009.

AVIATION - SAS Group will sell 49% of Estonian Air to Estonian state. The Estonian government will provide approximately 22 M€ in a new rights issue and SAS will convert approximately 2,2 M€ of loans into equity. After the rights issue the Estonian State will hold 90% and SAS 10% of Estonian Air.

IT - IBM signed an agreement with the Lithuanian government to set up a R&D center in Lithuania to conduct research in nanotechnology, life sciences, health-care innovation and intellectual property for innovative management. Lithuania will use EU aid to invest 12 M€ in the venture every year, matching IBM’s contribution.

IT - Estonia and France have reached an agreement where the headquarters of the European Union’s new IT agency will be located in Tallinn but servers will be placed in France. The agency should start operations in 2012 and employ about 100 persons in Tallinn.

IT – Cogent Communications, a US internet services provider, has launched a subsidiary in Vilnius. Cogent, which operates 40 data centres worldwide, previously served its customers in the Nordic and Baltic countries via a subsidiary in Sweden.

RETAIL – Galleria Riga, a 41 000 m2 shopping mall, was opened in Riga. The center will house roughly 170 shops and restaurants on seven levels and has parking for 200 cars.

RETAIL – Prisma has opened its first two stores outside of Tallinn in Narva and Tartu. The Narva store has more than 9 000 m2 of retail area, making it the largest hypermarket in the Narva region. The Tartu store has a sales area of some 6 400 m2 and employs more than 100 people.

REAL ESTATE DEVELOPMENT – Finnish Technopolis and Estonian Smart City Group have officially launched Technopolis Ülemiste, which has a 63,5 M€ or 70 000 m2 property portfolio, out of which 46 000 m2 is modern office space. The company also owns 150 000 m2 of building rights.

REAL ESTATE - Real estate developer Metro Capital Management has started works in Tallinn in a seven residential buildings project, which will have 90 apartments. The total cost of the project is estimated to be around 6 M€.

REAL ESTATE - Real estate prices in Riga recovered 27% in 2010, the fastest growth in the world. In September 2009, the Latvian real estate prices reached their lowest level of 455 €/m2. In 7-8/2010, the average cost in Riga was already 580 €/m2.

FOOD SERVICE INDUSTRY - McDonalds will invest 20 M€ in the Baltic States by 2013. Over a half of the 7,3 M€ investment allocated in Estonia will be spent on opening three new catering facilities, while the rest is used for remodeling and IT development.

FOOD INDUSTRY – Vaasan & Vaasan owned Leibur acquired Latvia's third-largest bakery Dinella. Last year Dinella produced 12 Mkg of baked products. The company's revenue amounted to 13 M€ and it has 460 employees.

FOOD INDUSTRY - Swedish Löfbergs Lila acquired Latvian coffee producer Melna Kafija. Experts estimate that with a turnover of around 7 M€ and a profit of 0,4 M€ last year, Melna Kafija sales price could have been roughly 5 M€.

CONSTRUCTION INDUSTRY - Svenska Mätcenter, a Swedish measuring services company, has acquired its Estonian peer Geomark with a turnover of approximately 1 M€ for an undisclosed amount. Due to the crisis in construction in Estonia Geomark’s, staff has halved from 30 to 15.

September 2010

GDP DEVELOPMENT - Estonia's Q2/2010 GDP growth of 3.5% y-o-y was the 4th highest among EU 27. At the same period Lithuanian economy grew 1.3 %, as export growth and manufacturing picked up. Latvian economy shrank 6 % in the Q1/2010 y-o-y, although the contraction is slowing down as manufacturing and exports advance.

FOREIGN DIRECT INVESTMENTS - Estonia ranks 22nd in the global incoming foreign investments index compiled by the United Nations. Lithuania ranks 117th and Latvia 134th.

CREDIT RATING - Standard&Poor’s improved Estonia’s state rating to level A, maintaining its ‘stable’ outlook. S&P noted that Estonia’s accession to the euro area from the year 2011 should significantly decrease the risk of changes in the exchange rate and should hence improve Estonia’s access to European capital markets.

FOOD INDUSTRY – HKScan’s acquisition of the Jelgavas Galas Kombinats was approved by the Latvian Competition Board.

IT - US IT corporation EMC is looking into investment opportunity in Lithuania. Lithuania is seeking to become an IT Support Centre of the Nordic Baltic region by 2015 and has already attracted Barclays and Western Union to set up centers.

FOOD INDUSTRY - Ukrainian confectionery group, the Roshen Confectionary Corporation, has announced that is planning to invest 8M€ in the modernization of its caramel production facility in Lithuania to increase the production capacity to 1,290 tonns/month.

WOOD INDUSTRY - Danish Inter-Invest A/S bought Estonian window and door components manufacturer Barrus at an estimated price of 3,2-6,4M€.

CONSTRUCTION MATERIALS - Henkel Makroflex AS is moving the Finnish production of building foam and sealants to its plant in Pärnu. The planned investments for 2010 in the Pärnu plant amount to approximately 0,5M€ and there are plans to further expand the plant in the coming years.

PUBLISHING – First issue of Forbes Latvia hit the newsstands on June 1 with 20 000 copies.

POST – Finnish Itella Corporation acquired the local network and the brand of SmartPOST, the company that launched Estonia's first parcel network.

June 2010

GDP - Latvia’s economy will contract 3% this year before rebounding in 2011, driven by exports. The Central Bank raised its 2011 growth estimate to 3.9% from 3% and said the economy may expand 4.7% in 2012. The economy is rebounding from last year’s 18% slump as manufacturing and exports advance. Industrial production rose an annual 7.4% in the first quarter, while exports rose an annual 19.7% in March. GDP contracted an annual 6% in the first quarter.

UNEMPLOYMENT - Lithuania’s unemployment rate rose in the first quarter to the highest in at least 12 years as the economy struggled to recover from a recession. The jobless rate jumped to 18.1% from 15.6% in the final three months of 2009. The rate was 11.9% in the same period last year.

SALARIES - In Estonia in the last 12 months the pay in accounting has decreased 3% and in marketing 6%, in Lithuania 10% and 15% and in Latvia 15% and 30%. Some example net wages given in Euros.

FOOD INDUSTRY - Estonia’s second-largest fresh meat and meat products producer Atria opened a meat industry that cost over 64M€ in Gorelovo near St Petersburg in Russia. The new complex includes 22,000 m2 of production facilities and a logistics centre, which is used also by the two other plants the concern has in Russia.

INDUSTRY - Finnish company Hyrle that produces frames and containers for electronics industry will open a plant in Rae parish near Tallinn, creating 30 jobs. Plant that cost 2M€ to build, will produce metal constitutions for energy, electronics and machine engineering companies likes ABB, Philips and Nokia.

FOOD INDUSTRY - Coca-Cola Baltics has confirmed that it has shut down its production facility in Estonia, and has moved it to Lithuania. The company said production could be re-launched in Estonia if a new factory should be built there. company has found suitable vacant land in Ropazi in Latvia and plans to purchase it in the near future. In the meantime, production of PET bottles will be transferred to our Lithuanian plant in Alytus and production of glass bottles to Poland.

FOOD INDUSTRY - Norwegian corporation Orkla concluded a contract for buying the Kalev Chocolate Factory and its cookies and flour mix segments on May 4. Orkla took over, via its Finnish company Felix Abba, 100% of Kalev Chocolate Factory shares, including the company’s plant in Jüri near Tallinn. The transaction does not concern companies not connected to the sweets industry. The cost of the deal is confidential.

RETAIL - SOK has completed an agreement to open a third Prisma hypermarket in Riga. The new hypermarket, which will be erected in the affluent suburb of Imanta, is set to open its doors in the spring of 2011. The building will also house a fast food restaurant as well as commercial premises for other trade businesses and service providers.

FOOD INDUSTRY - Finnish bakery and confectionery firm Fazer is planning to expand with an aim to become the leading food company in Latvia and other Baltic states. In Latvia, the company, which reported 24M€ in consolidated unaudited sales last year, has a 23% market share. Fazer Maiznicas bakery is the second largest bread producer in Latvia, while Fazer Amica with its 36 restaurants and cafes is one of Latvia's leading caterers.

OIL INDUSTRY - Poland's largest oil refining company PKN Orlen is planning to develop a network of gas stations in Latvia.

INVESTMENTS - 28 foreign companies invested over 1B€, which is by 5.3% more than as of 1 January 2009, and created nearly 5,300 new jobs in Lithuania. In 2009 Most of FDI projects in Lithuania were launched by financial services companies (9 projects), food, drink and tobacco enterprises (4 projects), IT companies, as well as metal processing and textile manufacturers (3 projects each). The largest investment were made by Swedish (11.8% of total FDI), Polish(10.5%), Danish(10.4%), German(10.4%) investors.

GDP - Compared to the first quarter of 2009 Latvias GDP in the first quarter of 2010 has decreased by 6.0%. Latvia's economic contraction is slowing from last year’s 18% slump as manufacturing and exports advance. The decrease in GDP was due to the drop in the following sectors: in trade (share in GDP structure – 16.8%) – 8.1% and in construction (5.7%) – by 43.2%. In its turn, there was an increase in transport and communications (which comprises 12.5% of GDP) of 2.3% and in manufacturing (10.8%) – by 6.8%.

ENERGY SECTOR - The first waste-to-energy (WTE) unit in the Baltic States will be completed in 2012. The cost of the combined heat and power energy-generating unit, to be delivered as a turnkey solution, is about 10M€. The new unit will be able to burn up to an annual 220,000 tonnes of municipal waste that remains after sorting as well as construction and industrial waste.

RATING - The international credit rating agency Moody’s Investors Service raised the outlook for Latvia's Baa3 rating from negative to stable. The outlook on Lithuania's Baa1 rating, the third-lowest investment grade, was lifted to stable from negative. Moody’s also upgraded the outlook for Estonia’s state rating to from negative to stable.

RETAIL - British retail chain Marks & Spencer opened its first grocery store in Estonia. The store was opened in April in Rocca al Mare shopping centre. The grocery store will sell only Marks & Spencer’s product series.

TRANSPORT - Approximately 1B€ will be invested in the development of the national airline Air Baltic Corporation (airBaltic) in three years. This investment will be possible thanks to the government's decision to increase the share capital of airBaltic. The bulk of the investment will go into renovation of the airBalticfleet. Eight "Dash Q 400" planes will arrive in Riga, which will be bought on lease.

INVESTMENTS - Foreign enterprises are again bringing their call centres to Estonia and that will soon create thousands of new jobs here. West European and Nordic companies wish to close the accounting support service units in their homeland to cut costs and locate them in Estonia where wages have fallen due to the economic crisis.

March 2010

EURO - Estonia's bid to become the 17th member of the euro zone on January 1, 2011 seems ever more likely despite the worries caused by Greece's budget crisis.

INVESTMENTS - Due to overflow of funds, the Swedish East Capital has temporarily closed its Baltic Fund. In January Riga and Vilnius stock exchanges saw an 15% increase, while in Tallinn shares appreciated by 35%.

CAR SALES – New passenger car registrations in Jan-February 2010 decreased y-o-y by 46% in Estonia, 43% in Latvia, 31% in Lithuania.

SALARY LEVELS - Public sector salaries in Latvia have been lowered roughly 45% in a year whereas private sector wages have fallen 5-30% over the last 18 months.

TAXATION - Latvian personal income tax rose to 26% on January 1, 2010.

CREDIT RATINGS - S&P, Fitch Ratings and Moody’s Investors Service all give Latvia a negative outlook in their ratings meaning that it is more likely to be cut than raised or left unchanged.

GDP DEVELOPMENT - Lithuania’s economy grew 0,5% in the final three months of last year thanks after having grown by 1% during the Q3/2009. The growth was supported by stronger industrial output and recovering exports.

REAL ESTATE - Although Lithuanian prices fell 31% last year, Vilnius residential real-estate prices are 15-20% higher compared with other capitals in the Baltic region. Prices in Latvia have tumbled 61% from the peak in April 2007, while Estonian prices declined 53% in the same period.

REAL ESTATE – Technopolis Oyj bought 51% of Ülemiste City, which has 47 000 m2 of new office space in Tallinn. Excedea was the buyer’s main advisor in the deal.

TOURISM – Construction works of 64 M€, 162 ha Risti Golf Club and housing estate for 750 people are scheduled to start this summer and take about 5 years to finish.

FOREIGN DIRECT INVESTMENTS - Foreign direct investment to Lithuania as of October 2009 amounted to 10 Bn €, which is 3,3% more than by July 2009. The largest group of investors, with 1,2 Bn €, were the Swedes and the largest area of investment, 1,3 Bn €, was manufacture of petroleum and chemical products.

BANKING - An international investment group led by British banker and financier Peter Hambro has submitted an offer to the Latvian Privatization Agency to acquire Parex Banka, which became state owned in Dec 2008.

AUTOMOTIVES - US-Swedish Autoliv Inc. made a buyout offer for remaining 49% of shares in AS Norma, an Estonian seatbelt maker. The value of Autoliv Inc.’s offer was 38 M€, which was 28% higher than the closing price on Feb. 26th.

ELECTRONICS - Incap Oyj, a Finnish maker of components for wireless networks, plans to close its electronics plant in Vuokatti and transfer production to its Estonian unit during this year. Restructuring of production will improve efficiency of operations and bring savings of approximately 3 M€ in 2011.

MANUFACTURING - Swedish Trelleborg will completed a new 6,4 M€ production building in Estonia and hire about 70 people. The production space will increase by 2100 m2 double the company’s capacity in Estonia.

FURNITURE - Estonian company Hapval is starting to assemble chairs for the Swedish furniture giant Kinnarps, which became Kinnarps daughter company in Sep. 2009 as Kinnarps acquired Swedish NC Möbler.

BREWING – Olvi owned A Le Coq, one of Estonia's largest breweries, plans to increase export of cider by 50% in the nearest few years. Initially the target markets are Denmark, Sweden and UK.

FOOD INDUSTRY – Jago, a Polish food distributor, has signed a letter of intent with an Estonian company to acquire a 64% stake in the company. The Estonian counterpart owns shares of three Lithuanian frozen foods distributors.

January 2010

EURO ADOPTION - It seems likely that Estonia will be able to adopt the euro in 2011. Adoption would bring cheaper and bigger capital inflows, make investments more attractive and, hence, contribute strongly to growth in 2011.

RECESSION - The value of 100 most valuable companies in Estonia has fallen by 55% from about 20B€ to about 12B€.

REAL ESTATE - Apartment prices in Estonia fell to the lowest level in five years in the Q3/2009 due to rising unemployment and declining wages. The median price of an apartment declined 6% from Q2/2009 to 580€/m2. Property and land sales fell compared to last year by 25%. Individual and corporate investments into real estate, slumped an annual 39% in 2Q/2009.

RETAIL - Bauhaus started construction of a
20 000 m2 store in Tallinn, which will become the largest hardware store in Estonia.

FOOD INDUSTRY - Saarioinen opened its new 14 M€, 6 000 m2 plant in Estonia. The new plant is located in the vicinity of Rapla.

TELECOM - TeliaSonera has increased its ownership in Eesti Telekom to 98% and has started a procedure to acquire the remaining shares.

AVIATION - Lufthansa Technik, the world market leader in the maintenance, repair and overhaul of commercial aircraft, engines and components, is looking at Tallinn as a possible maintenance centre.

GDP DEVELOPMENT - Despite increasing export demand by Russia and the EU, the Latvian economy has continued its steep decline throughout 2009. Recently, devaluation speculations have re-emerged, as uncertainty regarding the next loan tranches has strengthened. Devaluation in Latvia would via contagion effects increase uncertainty in the entire region.

BUDGET APPROVED - Approval of the 2010 government budget has reduced the short-term uncertainty about the economy in Latvia, but longer-term fiscal sustainability problems remain – more consolidation is to come, the tax system needs to be modified and structural reforms improving public sector efficiency and business environment must be continued.

PUBLIC DEBT - External debt in Latvia will rise to 175 % of GDP by 2011, compared with 127% of GDP at the end of 2008, mostly due to the economic contraction.

SALARIES – In 2009 labor costs in Latvia diminished by 13.5% y-o-y.

RETAIL - Tallinna Kaubamaja, Estonia’s largest retailer said it will close all six of its Selver supermarkets in Latvia and cut 220 jobs in the neighboring country because of a “sudden deterioration” in the Latvian economy.

GDP DEVELOPMENT - The Ignalina nuclear plant closure in Lithuania is estimated to have a negative 0.8-1% impact on GDP growth in 2010.

RETAIL - Danish retailer Jysk says it sees development opportunities in the current crisis and continues expanding its network in the Baltics.

IT - Barclays Plc, the U.K.’s 3rd largest bank, will open an information technology center in Vilnius. The hub will be fully operational by the middle of this year and will employ at least 250 people by the end of 2011.

STEEL INDUSTRY - Russian TESO Engineering will start construction of a steel mill in Lithuania in midlle of 2010. The 30 M€ electro-metallurgical mini-mill’s products will be sold in the local market. The two other companies participating in the project are financial group Taurus Capital and Luxembourg-registered SSP Company Limited.

September 2009

COMPETITIVENESS – Baltic states, not surprisingly, dropped in the recent World Bank Global Competitiveness Survey. Now e.g. Russia (63rd) and Romania (64th) are ahead of Latvia in competitiveness.

E-SOCIETY – In the annual e-readiness survey made by the Economist and IBM Estonia and Lithuania improved their ranking despite the economic crisis:

DEVALUATION – Deutsche Bank sees that devaluation will not happen in new EU countries whereas Unicredit bank still believes that Latvia will need to devaluate within the next 18 months.

UNEMPLOYMENT – Job cuts in Estonia have hit especially industries employing men. As a result the male unemployment rate has risen to 17% whereas the female unemployment is 10%.

TELECOM – Telia Sonera offered 327 M€ for the remaining 40% Eesti Telecom. The company made also a cash offer on Lithuanian TEO LT in which it has no prior stake.

ICT - Barclays bank will establish a 50 M€, 300 person computer service center in Vilnius.

ICT – Ericsson acquired Elcoteq’s factory in Tallinn at a price of 30 M€.

TECHNOLOGY CENTERS – Estonian state, universities, EU funds and private companies will invest 83 M€ to eight technology development centers during the next 6 years. Three of the centers are new.

MACHINERY INDUSTRY – Cargotec opened a 19 M€ plant in Estonia. The new plant will export all of its production.

BANKING - EBRD invested 85 M€ to rescue Latvian Parex bank and now owns 25% of its shares.

ENERGY – EBRD plans to invest 45 M€ in Freenergy AS, which develops renewable energy projects across the Baltic states.

June 2009

GDP DEVELOPMENT – GDP forecasts for 2009:
Latvia -16%
Lithuania -14%
Estonia -13%

UNEMPLOYMENT – Forecast for 2009:
Latvia 15%
Lithuania 13%
Estonia 13%

INDUSTRIAL PRODUCTION – In April Estonian industrial production fell 33.7% y-o-y, representing sharpest fall in the European Union. After Estonia came Slovenia with 24.9% and Lithuania with 24.5%. Poland experienced smallest decrease 6.9 %.

RETAIL - Retail sales in Estonia fell to 295 M€ in April 2009, equivalent to 15% y-o-y decline. Particularly hard hit were stores selling household goods and appliances, hardware and building materials.

ENERGY - Fortum opened a 60 M€ combined heat (52MW) and power (25MW) plant in Estonia. The new power plant will use biofuels and local peat as fuels.

ENERGY - Eesti Energia announced it will build a new 190 M€ oil-shale plant. The plant is to be opened in 2011.

REAL ESTATE – The real estate prices in Riga fell 30% during the Q1/09 being the world’s worst market.

AUTOMOTIVES – Registration of new cars in Latvia dropped by 80,4% in May y-o-y.

ENERGY - Latvian businessman launches 60 M€, 12 MW biogas production project. The construction of the new plant will get under way as soon as the construction permit is received.

March 2009

INDUSTRIAL PRODUCTION – Estonian industrial production decreased in 2008 by a total of 6.5% compared to 2007. By January 2009 the decline had continued already for 10 months. The development in the last few months can almost be called a free fall: 12% in October, by 17% in November 21% in December and 29% in January y-o-y.

GDP – Bank of Estonia sees that the risk scenario of 9% GDP drop in 2009 is ever more likely to materialize. In the meanwhile the Latvia the central still projects -5% GDP development for 2009, although the 1Q/2009 decline was 10,2%.

RESCUE PACKAGE – The new Latvian prime minister stated that the country is likely not to meet the conditions set by the IMF for receiving further installments of the 7,5 Bn $ bailout package (1/3 of the Latvian GDP) and that without additional financing the Latvian government will run out of money in June.

DEVALUATION – Experts see devaluation risk to be high in all Baltic countries with development in Latvia being in the key role.

AIRLINES – SAS sold its share (47,2%) in airBaltic to company management and is interested in divesting its 49% of the Estonian Air. In order to avoid bankruptcy a capital injection of close to 5 M€ was made into the company. The bankruptcy of Lithuanian FlyLAL in January made Vilvius the hardest to reach capital in EU.

EMPLOYMENT LAW – In late December Estonian parliament approved changes to employment law, which increases flexibility regarding working time and decreases employer expenses in case of redundancies to one months salary regardless of seniority.

BANKRUPTCY LAW – Estonia has adopted a Reorganizations Act similar to the Finnish “saneerauslaki” and the US “Chapter 11” to avoid further bankruptcies and to give an alternative solution for distressed companies.

RETAIL – Marks & Spenser will open its first shop in Tallinn in May. Estonia was the last of the Baltic states without a Marks & Spenser outlets.

CHEMICALS INDUSTRY - Rentokil Initial, the UK pest-deterrent enterprise, is planning to is planning to invest about 2,5 M€ into expand its operations in Estonia and bring to the market a number of new products and services that are targeted to enterprises operating in the sectors of health care, food industry, tourism, hotels and agriculture.

December 2008

CONSTRUCTION - Construction in Latvia decreased in the Q3/2008 y-o-y by 7.3% (at constant prices). The volume of new construction shrank by 7.7%, whereas repairs and reconstruction declined by 6.9%.

CONSTRUCTION - AS Merko Ehitus, the largest publicly traded Baltic builder, predicts the construction market in Estonia, Latvia and Lithuania to continue shrinking in 2009 and 2010 as the economies falter and banks cut back lending.

INFLATION - Latvian inflation rate fell to 13.8%, down from 14.9% in August, which is the lowest level in 11 months. Latvian inflation continues to be the highest among the EU27. In Lithuania inflation has slowed down to 10.5% and in Estonia to 9.8%. The Estonian inflation is forecasted to be at 7.5% in 2009 and 5.8% in 2010.

RESCUE PACKAGE - Latvian government is rewriting its 2009 budget to include 1,4 bn EUR cuts (17% of the original budget) in order to secure a 5 bn $ loan from the IMF.

HOUSEHOLD GOODS - The Finnish-owned Koduextra household goods retail chain has acquired the rivalling chain SuperBox, the last Estonian- owned company left on the household retail market, for an undisclosed sum. The merger adds 15 SuperBox stores to Koduextra's 9, giving the company a clear leadership ahead of its competitors Jysk, Tiimari and Novalux, who had a total of 37 stores in 2007.

AVIATION - Without a capital injection from the owners, Estonian Air might go bankrupt and is certainly unable to buy new planes, which are essential for it to change its strategy to become a regional airline.

PRODUCTION - PKC Group, the Finnish producer of wiring harnesses for heavy vehicles, cuts its production capacity by 40% due to declining delivery volumes and falling prices. PKC has two plants in Estonia with a total of 1 000 employees. PKC also has two plants in Russia and one in Finland.

IT - SAP Baltics' expansion has reached Estonia where the company opened up an office. The company aims to raise its market share to 30% from the current 5%.

AUTOMOTIVES - A-Katsastus has acquired two inspection stations in Estonia as a first move in the process of becoming the market leader. In Latvia A-Katsastus is already the second largest player in the market.

VISA FREEDOM - Lithuanian-Belarusian border residents may travel without visas already in 2008. The residents living near the Lithuanian-Belarusian state border will be granted a possibility to enter the both countries without visas.

October 2008

FOREIGN INVESTMENTS - Foreign investments to Estonia increased by 351 M EUR or 1% to 28 Bn EUR in the second quarter. Most of the investments came from Sweden (38%) and Finland (21%).

COMPETITIVENESS - Estonia fell 5 places, to 32nd, in the World Economic Forum's Global Competitiveness Index, ranking mainly due to worsening macro economic outlook. Now Estonia is ranked just above Czech Republic (33nd) and clearly higher than Lithuania (44th), Slovakia (46th), Russia (51st) and Latvia (54th).

UNEMPLOYMENT - In August unemployment in Estonia was 4%, which is lower than the 6.9% average for EU-27. The other Eastern European EU member states with below average unemployment are Slovenia (4.2%), Czech Republic (4.3%) and Lithuania (5.1%).

REAL ESTATE - Despite some growth in the number of transactions, apartment prices continued to fall in Estonia. In September y-o-y the decrease in prices in Tallinn was 19% reaching even 25% in the very city centre. Prices of houses built on the fields on Tallinn outskirts are most vulnerable and the prices have fallen up to half in one year.

REAL ESTATE - According to a fresh report the Riga apartment prices have dropped 39% over the past 1,5 years. In 08/08 the average apartment price was 1050 euro/m2.

ENERGY - Eesti Energia, the Estonian energy company, announced that it intends to capture a third of the energy market in the Baltics and become the energy market leader in the area by 2015. This year the company has increased its corporate customer base in Latvia from 8 to 40 companies.

RETAIL - All major shopping centers in Tallinn have added or are about to add thousands of square meters of floor space. For example, Rocca al Mare, one of Tallinn's largest shopping centers, is opening a new 21,000 m2 wing.

RETAIL - In August 2008 the Estonian retail sales decreased 6% y-o-y; in grocery stores the drop was 3%.

AVIATION - The Latvian national airline airBaltic will leave the Lithuanian market. The decision was made after Lithuanian court decided to arrest properties of airBaltic and the Riga International Airport, worth about 55 M EUR.

RETAIL - Retail shopping mall operator Linstow Center Management is planning a 400 M EUR investment into building a new retail park near Riga. According to plans, the construction of the 750,000 m² retail park should commence in 2009.

RETAIL - Lithuania's largest retailer chain Maxima LT has tightened their belt. The company has put investments, worth approximately 38 M EUR, on hold. Layoffs are also considered.

August 2008

ECONOMY - In the 2Q/2008 Estonian economy grew -1.4%.

TRANSPORT - Port of Tallinn is being developed to a major regional container centre with the objective to reach 3-4 mln TEUs a year by 2010.

IT - The combined revenues Baltic IT companies grew 34.2% in 2007. IT sector growth has been above 20% for the last 4 years.

ECONOMY - The Bank of Lithuania changed forecasts for 2009:
GDP growth 4.2% up from 3.9%
Average annual inflation up to 11.8% from 9.8%
Unemployment rate to 6% from 5.5%
Growth of average wages to slow down to 5.7% from 19%
Current account deficit go down from 13.5% to 10.8%

INDUSTRY - Over first half-year 2008, the total industrial production of Lithuania grew 7.5%, compared to the same period last year.

AGRICULTURE - Achema, Lithuania's nitrogen fertilizer and chemicals producer controlled by Achema Group, has invested 38.7 M EUR into a new methanol shop.

TRANSPORT - Riga airport is going to expand to become four times bigger and will be able to serve 12 million passengers per year making it the biggest in the region.

REAL ESTATE - In Riga the real estate prices have fallen 20-30% due to a smaller amount of loans.

FORESTRY - Bergvik Skog, a Swedish forestry company, is taking over two Latvian companies in the largest Latvian transaction involving forest properties.

May 2008

ECONOMIC DEVELOPMENT - In past ten years Estonians' purchase volume has grown 250% being the fastest consumption growth in Europe. Purchase growth has increased Estonian economic growth, raised wages and brought hundreds of thousands of people out of poverty.

RETAIL - SOK, the Finnish retailer, is planning to open grocery supermarkets also in smaller Estonian towns. The expansion will most likely begin from Harjumaa region.

CONSTRUCTION - The Estonian construction market grew only 7% in 2007 compared to the rapid growth of 30% in 2006. In 2008 unemployment in the construction sector has soared to 6 000 people.

CONSTRUCTION - Cramo, the Finnish rental services provider, acquired Tapeks Noma, a Latvian construction machinery and equipment rental services company with 16 outlets.

FOREIGN DIRECT INVESTMENT - According to Statistics Lithuania foreign direct investment in Lithuania grew by approximately 20% compared to the previous year, amounting to roughly EUR10 billions. Investors from Poland contributed the most (18%), followed by Denmark (13%) and Sweden (12%). Most of the investments went to manufacturing (36%) and financial intermediation (17%).

RETAIL - Stockmann, the retail chain, has signed a preliminary lease agreement for its first department store in Lithuania. The new 13 000 sqm department store will be located in Vilnius.

ENERGY - The Lithuanian government is considering the possibility of constructing a EUR 500M LNGterminal in the early 2010's due to the imminent closure of the nuclear power plant in Ignalina.

BEVERAGES - British Brewery Scottish and Newcastle accepted Carlsberg's and Heineken's joint acquisition offer making Carlsberg the largest shareholder of Saku Õlletehas with 75%. The current market value of Saku Õlletehas is 96 M EUR.

INTERNET USAGE - According to the European Commission Estonia, Latvia and Lithuania ranked 10th, 12th and 17th in percentage of total population using the Internet among the EU27 member states.

March 2008

ECONOMIC DEVELOPMENT - Hot domestic demand is beginning to cool in all Baltic states and credit growth is slowing to some extent, says the SEB bank. All three economies are decelerating and will grow below potential level next year. Inflation remains high and the risk of a hard landing persists.

The Estonian economy is growing at the slowest pace in eight years and although Latvian economic development remained at a high level, the current figures indicate that the peak of record fast growth has been passed.

GDP growth Q4/07 CPI growth 12/07
Estonia 4.5% 9.6%
Latvia 9.6% 14.1%
Lithuania 8.7% 8.1%

TAX SYSTEM - A survey by KPMG ranks Estonia's tax system among the top five in Europe. 400 businessmen ranked Estonia above average in all categories, especially in stability and low tax rates, both of which got an 80% approval rating.

BANKING - Nordea Bank Estonia, reported a 44% increase in its profits for 2007, thus amassing a profit of EUR 20 mln. Asset volume grew by 41% y-o-y and loan portfolio by 59% y-o-y.

FOREIGN DIRECT INVESTMENTS - FDI into Latvian companies increased by 23% y-o-y in 2007. The largest foreign investments were made in the financial and real estate branches. The most significant foreign investments were made towards Hansabanka, worth EUR 100 mln.

TELECOM - In its long battle over control of Lattelekom, TeliaSonera has announced that it has made a non-bonding bid to the Latvian government for the shares in fixed line operator Lattelecom and its mobile unit LMT. Currently TeliaSonera owns 49% of Lattelecom. The value of the bid is estimated EUR 0.7 bln.

TRANSPORT - LLC Joint Venture Baltic Oil Terminal plans to build a 7.5 mln tonnes refinery and a 10 mln tonnes oil terminal in Latvia. The refinery is planned to be built in Daugavpils, and the oil will be delivered form Kazakhstan or Russia by pipeline. The project is valued at EUR 2.5 bln.

ENERGY - Lietuvos Energija and Svenska Kraftnat finished a feasibility study concerning a power bridge between Lithuania and Sweden. The study concluded that an interconnection between the power grids would be both feasible and profitable. The project could be implemented by 2015, the cost of the project being between EUR 516-637 mln depending on the cable.

BANKING - Lithuanian banks reported record-high profits in 2007. According to preliminary data, net profits of Lithuanian banks increased by 73% y-o-y, The profitability of the Lithuanian banking system has been growing for six successive years.

January 2008

ECONOMIC DEVELOPMENT - The central bank of Estonia has denied rumors of a devaluation of the kroon against the euro. The official statement came on 26 November after a massive sale of kroons among the Russian-speaking population (Russians form around a quarter of Estonia's population). The panic followed a report on a website of a radical Russian-speaking youth movement, Night Vigil, which claimed that the Estonian government had decided to change the exchange rate peg from EEK 15.65 to EEK 24.64 to the euro.

ECONOMIC DEVELOPMENT - Lithuania's statistical office confirmed the preliminary estimate of real GDP growth of 10.8% in the third quarter of the current year. GDP was driven by non-manufacturing sectors: agriculture and construction experienced the highest growth rates. As regards to expenditure, a modest slowdown in consumption growth and in the growth of gross fixed capital formation was observed. Salaries are still growing very strongly. Average monthly earnings grew by 17.9% in Q3 2007, reaching LTL 1,950 (EUR 564). The interbank rate continued to rise sharply: the 3-month Vilibor hit 6.74%, the highest level since 2001. The Vilibor rate is currently over 3% higher than one year ago (3.64%).

CAR SALES - The growth of new car sales in Estonia has slowed down due to economic deceleration. In the first quarter of 2007, the sales of new cars grew by 50%, but in September-November the sales grew only by 10%. However, 2007 annual growth will be 20% which is record high.

LOGISTICS - Estonia's largest ferry group Tallink borrows EUR 144 mln to finance the construction of one of its cruise ferries, Cruise 5. The ferry is planned to be delivered in spring 2009 by the Finnish shipyard Aker Yards. The total cost for the ferry will be EUR 180 mln.

CONSTRUCTION - In Lithuania, a group of Danish and local investors has announced intentions to build a mega business centre in Vilnius. The plan is to build a 12-storey World Trade Centre by 2010. The cost of the project is estimated to be EUR 580 mln

HOUSING LOANS - In Latvia during the first ten months of 2007, long-term housing loans increased by 40% compared to the end of 2006. According to the Latvian Central Bank, Latvian banks had issued EUR 6.5 bln in housing loans by October 2007. Especially housing loans for longer than five year terms increased in their number.

CONSTRUCTION - There are plans to build a multifunctional complex in Riga, Latvia. The total investment is estimated to be around EUR 100 mln. The new complex is planned to serve as an alternative for Riga railway station and to facilitate passenger transportation and to decrease traffic flows in Riga.