Expansion helps debt level drop

TALLINN - As compared to the end of 2010, corporate debt grew by 0.3 percent to 17 billion euros in the first quarter of 2011 in Estonia, Estonia’s central bank Eesti Pank announced, reports news agency LETA. The lending stock intermediated to non-financial companies by the domestic financial sector decreased by 11 percent, year-on-year.
At the same time, the borrowing from abroad went up by 20 percent, so the share of external loans in corporate debt liabilities increased to 27 percent. Against the backdrop of rapid economic growth, corporate indebtedness continued to shrink, making up 116 percent of GDP (84 percent excluding domestic debt between companies) by the end of the quarter. Corporate financial assets increased by 1 percent over the first quarter. This was supported by a hike in stock market yields and improved profitability, which helped offset the decline in deposits.

Like in previous quarters, the financial position of households was affected by growing deposits and shrinking debt. The quarterly growth rate of financial assets accelerated to 3 percent, whereas financial liabilities decreased by 1 percent. By the end of the quarter, household indebtedness receded to 52 percent of GDP. Changes in the financial sector were mainly related to the decrease in the reserve requirement after the adoption of the euro. In addition, the balance sheet total was reduced by a shrinkage in the loan portfolio. As a result, the level of assets and liabilities declined by 6 percent and 5 percent, respectively, in the first quarter.

After two years, the Estonian economy as a whole was a net lender vis-a-vis the rest of the world. The net borrowing of the total economy was about 100 million euros in the first quarter. This was mostly due to an increase in the liabilities (most of all in the equity) of non-financial companies.