In 2016, Estonian businesses borrowed more than before from banks operating in Estonia and less from elsewhere, while the debt burden of the private and government sectors remained unchanged compared to 2015, the Bank of Estonia said on Friday.
Growth in corporate debt has been restrained by the modest level of investment and reduction in lending between companie. A rapid increase of eight percent was registered in 2016 in the tock of loans and leases taken from banks operating in Estonia. Borrowing from abroad by companies remained unchanged throughout the year, however lending between companies and borrowing from holding companies contracted substantially. This meant that corporate debt liabilities increased by only 0.2 percent during all of 2016, said Taavi Raudsaar, an economist at the Bank of Estonia.
Household loan liabilities increased at the same rate as incomes but somewhat slower than savings last year. Increasing wages, low unemployment and low interest rates on loans all encouraged increased borrowing demand by households, whose loan liabilities increased by six percent. The volume of both housing and consumption loans from banks and loans from other lenders increased.
The rapid growth in incomes and extensive savings helped the sum total of cash and deposits of households to increase by more than eight percent on year. In addition, an increase by more than a quarter over the course of the year was registered in the value of tradeable securities held by households. Despite the rapid growth, the financial savings of Estonian households still remain below the EU average in relation to income.
The total debt of households and businesses in Estonia's private sector did not change substantially in 2016, standing at 127 percent at the end of the year, which is roughly on par with the EU average. The indebtedness of Estonian companies and households is relatively high compared that in countries with a similar income level.
The indebtednes of the Estonian government, which remains lower than that of any other country in the EU, declined very little last year, equaling 9.7 percent of the GDP at the end of the year.
The Estonian economy was once again a net lender to the rest of the world both in the final quarter of last year as well as in 2016 overall. Since 2009, Estonian residents have put more funds abroad than they have taken in from abroad. This is due to the fact that Estonian households and companies have begun saving more and investment in the Estonian economy has declined.
Increased saving and the position as a net lender have led to an imrpovement in figures reflecting external debt and the international investment position, however low investment also restricts the economy's capacity for growth in the future, the economist said.
Editor: Aili Vahtla