Loan demand to rise

  • 2011-07-06
  • From wire reports

TALLINN - The Bank of Estonia estimated that companies will sooner or later have to start replacing their depreciated fixed assets and start taking more loans instead of using their own resources, reports Aripaev Online. The recent Corporate Financing Overview, compiled by the Estonian Central Bank, stated that the turnover of loans taken for acquiring fixed assets continues to be rather low.

Companies working in Estonia are recovering from the recent recession with relatively little need for loan resources. On the one hand, they have been able to re-utilize free production capacity in the new growth cycle. On the other hand, companies have been using their own funds and intra-group resources to finance business.
The current loan demand is also shaped by the changing investment structure, which is no longer that much real estate oriented and that dependent on loan capital as it was in the previous cycle. As growth picks up further, the need for loan resources will grow, considering that the current inventories and production capacity may not suffice to maintain or increase current growth rates.

The Bank of Estonia estimates that the loan turnover in coming quarters will mostly grow on the basis of short-term financing that will be increasingly needed in the current improving economic situation.
Private borrowing is also on increase. “The financial behavior of households remains cautious for a while, but borrowing has nevertheless gained some momentum in recent months, given that the labor and real estate markets are recovering and the household confidence is improving,” the Bank’s experts stated.

Bank willingness and readiness to supply loans has increased over the year.