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Political panic over VAT hike only affected July’s figures
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August showed growth, September surprised with a decline
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Consumer confidence remains low, but retailers are optimistic about the future
The third-quarter results of Ülemiste Centre confirm that the fear of VAT increase, which had been stoked during the spring and summer, was overstated. Although July, August, and September brought both unexpected ups and downs, retailers are now looking to the future with more hope than ever before.
As one of the largest shopping centres in the Baltic region, Ülemiste’s turnover figures serve as an alternative indicator for experts assessing the state of the economy. “The results of the third quarter left mixed feelings — one month was very strong, while another turned out to be unexpectedly modest,” said Ülemiste Centre CEO Guido Pärnits. “Compared to last year, turnover in July, August, and September fluctuated within about 5% up or down, which overall gives no reason for either celebration or concern. Considering how much effort election-focused politicians put into discouraging people from shopping, one could say that, all in all, the third quarter went quite normally.”
According to Pärnits, July’s predictably modest results were directly influenced by political panic. “As we’ve seen, the VAT increase did not turn out to be the end of the world, as many had warned,” he added.
August proved that point, being traditionally one of Ülemiste Centre’s best months of the year. “With the start of the new school year and people returning from the countryside to the city, August typically sees higher spending and more frequent purchases. In addition, there are always more tourists this month, and this year favourable weather — an important factor in retail — also played its part,” said Pärnits.
After a successful August, expectations for September were high, but in the end turnover figures were lower than anticipated. “After heavier shopping in August, September is traditionally a calmer month — people take a breather and prepare for the next big shopping wave at the end of the year,” he explained. “This year, a few other factors also affected results — minor traffic congestion near our centre in early September due to Rail Baltica terminal construction, as well as the fact that several stores underwent renovation during the summer, including one of our key tenants, H&M, which only reopened its renewed store at the beginning of October.”
Overall, Pärnits described the situation as stable yet restrained. “Compared to Latvia and Lithuania, Estonian consumers remain cautious. Nevertheless, retailers are moderately optimistic about the start of the fourth quarter and the new year. Growth has been expected before and later adjusted with disappointment, but now renewed confidence comes from state and bank forecasts predicting an economic upturn,” he added. “Moreover, the government’s decisions to remove the tax curve and to cancel the income tax increase provide assurance that people will soon have more disposable income, which in turn creates the conditions for purchasing power to recover. One thing is clear: every crisis eventually comes to an end, and today there is more positive anticipation of that end than ever before.”
