Nearly a third more new long-term loans were issued to companies in Estonia last quarter than in the first quarter of the year, Raudsaar said according to a press release. This was largely due to seasonal factors, i.e. borrowing normally increases with the arrival of spring and summer. However, part of this was likely also because high levels of uncertainty over the growth of input prices, elevating interest rates and general economic developments had eased somewhat; this supports corporate investments and borrowing.

Overall, demand for corporate loans still remains rather modest. The volume of longer-term loans denominated in euro was 16 percent higher than in the second quarter of 2019, preceding the COVID-19 crisis. Input prices, however, have increased rapidly in the meantime.

Loan growth, meanwhile, varied widely across sectors, depending above all on their economic performance. The largest on year growth in loan stock — by almost a third — was in the infrastructure sector. This rapid growth comes mostly from loans to energy companies as well as to information and communication enterprises.

The growth rate of loans to the agricultural sector still remains around 10 percent. Real estate companies' loan growth, which led loan growth for a long time, has decreased, but it nonetheless remains slightly above the business sector average. On the other hand, the loan stock of manufacturing and logistics companies, currently facing difficult times, has fallen significantly this year.

Companies in Estonia assess the credit environment to be poor, as interest rates are rising and the economic outlook is uncertain. This assessment improved in the second quarter, however. This small improvement was seen in a majority of sectors, with the exception of manufacturing companies and hotels, which observed that the lending environment had become less favorable.

The average interest rate on long-term corporate loans has risen from below 3 percent a year ago to around 6 percent this summer. This growth is due to the increase in the Euribor; interest margins have been decreasing.

Although the ability of enterprises to borrow has suffered somewhat due to escalating interest rates and other costs, it is nonetheless still good. Profits have been increasing steadily in many areas of activity, and previously accumulated buffers in the form of deposits and equity are significant. This is very likely the reason why just fewer than 10 percent of enterprises are seeing financial problems as their main concern and why there are still quite a few companies in trouble with loan repayments.

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