Fast developing markets in Estonia. When and where to invest

Triin Vihalemm
EMOR Ltd, Estonia


The Estonian consumer market, like those in many East-European countries, is characterised by relatively low average income and significant financial stratification. See Figure 1

According to the estimations based on the data from the Household Panel and other surveys conducted by EMOR, the Estonian consumer market reached the capacity of 2 billion US dollars in 1994. The upper class, making only I per cent of the population, gives approximately one-third or 0.7 billion Estonian kroons of the money circulating in the consumer market.

The level of population's personal revenues is rising, though slowly. By the end of 1994, the net income per capita made 80 US dollars. This means that there will be no quick profit from manufacturing industrial goods for consumer market and developing retail trade chains. According to our prognoses it will take as much as two years before personal income level per capita reaches 170-200 US dollars per month and investing into these fields will be beneficial (see Figure 2). The gross income has nearly tripled in the past two years. At the same time the prices for goods and services have advanced (the growth of the consumer price index has been close to that of the income). Population's expenditures on electricity and heating form the bulk of the consumer price index. Further development of the market depends greatly on government policy-makers and their options. The authorities have to decide whether to keep the prices for electricity and heating low, looking for extemal loans, or to raise prices together with consumers' growing incomes in order to reconstruct the state's power economy which is in a very poor state. See Figure 2