2016: a perfect year for investing

Entrepreneur and investor Veikko Maripuu says it would be a good idea for both companies and private individuals to energetically invest this freshly started year
The economic development of Estonia in 2015 was characterised by cranes towering in larger cities and increasingly crowded shopping malls. The mood is especially joyful in the real estate sector, but also the confidence of consumers and their optimism in general have risen to recent years’ highs. When compared to Finland or Russia, for example, Estonia’s situation is in quite striking contrast in this regard, and this to Estonia’s advantage. Nevertheless, Russia’s economy and the causes of its miserable state are a phenomenon in itself at the moment.

The reasons for high consumer confidence are easy to see

In recent years, individual incomes have been steadily increasing. The continuing decrease in interest rates of mortgage loans and the fall in fuel prices gaining speed have left consumers more cash to spend, which in turn has enlivened consumption in the domestic economy. It is likely that consumption numbers to be reported in Estonia for last year’s Christmas’ and New Year’s time will represent all-time highs, which will first and foremost be a happy news for those involved in commerce, but also for service providers, restaurant owners and representatives of similar branches of the economy.

Unfortunately, Estonia is so small that our economy, unlike that of large countries, cannot uphold itself only on Christmas folly. The situation of the economy as a whole is far from being as positive as the sectors oriented towards domestic consumption might indicate.

For exporting companies, energy sector, and especially transit business, the year 2015 has been rather complicated. Wage pressures continue to be high, as pay rise expectations are fuelled not only by stronger consumer confidence, but also by the public sector. However, the decreasing profitability of industrial enterprises, which is due to growth of wages being much higher than labour productivity, has a direct influence on investor confidence and thereby also to the longer-term growth potential of the economy. Therefore, there is a contradiction between the seemingly good situation that can be seen when walking in the streets or shopping centres, and the much less favourable one seen when taking a closer look at the economy. Neither is Estonian economy doing well enough compared to its neighbours (leaving Finland, which was already discussed above, or Russia aside).

What can each and every one of us do?

It is fine to spend today, or support companies oriented towards domestic consumption that directly profit from people spending today, because this nurtures at least some part of the economy. However, prospects for the future might be brighter if you look a bit more ahead, and therefore set some of today’s spending aside for longer-term investments.

Real estate prices have risen fast; therefore, alternatives will be sought to investing in real estate. There are not that many such possibilities yet, although some signs give reasons for hope. Possibilities for investing in companies through different facilities, direct investment platforms etc. are becoming better. One of the possibilities for allocating money is to start your own company. Start-up sector is undergoing changes, moving from its current status as a niche branch of the economy into being more and more broad-based, and it is likely that in the nearest future, better financing possibilities will become available for launching ideas, projects and companies.
Fostering entrepreneurial spirit and providing it a more secure framework is clearly positive, because given the small size of Estonia’s economy, it gives a better export outlook for the country in the future.

For that reason, it is important to foster entrepreneurial spirit also on the national level and in the society as a whole, so that the prospective creators of new ideas could come up with fresh and bold ideas and good projects could get well thought-through and professional acceleration for conquering the world.

Also published at: http://www.aripaev.ee/arvamused/2016/01/06/veiko-maripuu-investeerimise-aasta