Debt liabilities of Estonian businesses up 2.5 percent in first quarter

The Bank of Estonia is the country's central bank.
The Bank of Estonia is the country's central bank. Source: (Martin Dremljuga/ERR)

Debt liabilities of businesses increased by 2.5 percent on year in the first quarter, as the increased economic growth also accelerated the debt growth of businesses and households, the Bank of Estonia said on Monday.

Investments that had increased strongly in the first quarter were financed first and foremost from businesses’ own funds as well as money borrowed from banks within Estonia, Taavi Raudsaar, economist at the central bank, said in a press release.

Raudsaar said that the volume of money received from abroad as equity and debt capital had increased moderately. Thanks to the acceleration of overall economic growth, the debt burden of companies, or the proportion of debt liabilities and gross domestic product (GDP), had decreased somewhat.

The loan liabilities of households had increased approximately at the same rate as incomes. Rising wages, low unemployment, and low interest rates on loans had all encouraged increased borrowing demand by households, and loan liabilities had increased by 6 percent. The volume of both housing and consumption loans from banks as well as loans from other lenders had increased, Raudsaar said.

The rapid growth in incomes and extensive savings helped the sum total of cash and deposits of households increase by more than 9 percent year on year. Beyond that, an increase by more than a quarter was registered in the value of tradable securities held by households.

Despite rapid growth the financial savings of Estonian households are still below the European Union average in relation to incomes, the bank pointed out.

The Estonian economy had again been a net lender to the rest of the world in the first quarter of this year—Estonian residents put more funds abroad than they took in. This is because Estonian households and companies have started to save more, and regardless of the increase in the first quarter the rate of fixed-asset investments is relatively low.

Editor: Dario Cavegn

Source: BNS

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