Companies, Population Showing Fiscal Restraint, Says Central Bank
According to the Bank of Estonia, the debt burden of companies and households has decreased significantly this year.
Corporate debt burden was down to 115 percent of GDP by the end of the second quarter and that of households, to 51 percent. Loan repayments will exceed new loans next year as well and the bank loan surplus is also continuing to decrease.
Companies' financial behavior has remained conservative, said the central bank. Sales revenue has recovered and due to strong demand from markets abroad, companies have mainly taken short-term loans.
The growth of long-term investment loans has been modest, as businesses have relied on in-house sources and re-invested profits. Foreign-owned companies have actively taken foreign loans and thus the share of foreign debt obligations has returned to the pre-boom 26 percent.
Households are being cautious, even though the job market situation is better and there is more confidence, the bank said. Growth in consumer spending has not been driven by new borrowing. Money left over after primary spending tends to be deposited into savings accounts, with new loans taken primarily for major purchases such as cars and homes.
Kristopher Rikken