The coronavirus pandemic has inflated the economic crisis in Estonia and in the global economy in recent months and is dragging on the future outlook for businesses. Economic uncertainty has caused many long-term investments to be put on hold until more certain times. This is seen in the reduced need of companies to borrow to fund investment. In consequence the total volume of long-term loans and leases issued to companies in the month was even lower in May than in April at 134 million euros, which was some 40% less than before the crisis, meaning the average from April 2019 to March 2020. The volume of short-term loans issued was also a quarter smaller than usual. The continuing pessimism at companies is shown by the notable drop in car leases, which showed no sign of rebounding in May.

The negative impact on the labour market of the crisis, and the uncertain outlook have continued to leave clear traces in household confidence as well. Activity declined in the housing market as some 80 million euros of housing loans were issued in May, which was 30% less than before the crisis. The volume of other loans and leases issued to households was also down substantially. The first signs of a revival in economic activity were apparent in the banking statistics for May though, as demand for financing for consumption increased a little, which was to be expected given that relatively tight restrictions were in place in April because of the coronavirus, and they were then eased during May.

The average interest rates on loans issued to companies and households did not rise during the months of the crisis. The average interest rate on long-term loans issued to companies was 2.6% in May and the average rate on housing loans with collateral was 2.3%.

The share of loans in the portfolio of the banks that are overdue remains very small. Only 0.7% of the loan portfolio by volume is overdue more than 60 days. It should be noted though that the banks have been granting payment holidays, which now extend to over 11% of the portfolio. Payment holidays give borrowers facing difficulties temporary support in surviving the acute phase of the crisis. They also give the banks a picture of how many borrowers may face lasting difficulties in repaying their loans.

Despite the difficulties in the economy, the total volume of deposits of Estonian companies and households has grown very fast in recent months. Corporate and household deposits are both 400 million euros larger than they were at the end of February, putting corporate deposits at 7.4 billion euros and household deposits at 8.7 billion. The rapid growth in deposits has been aided by companies investing less than earlier and households reducing their consumption. Equally the measures taken by the government have helped limit the fall in incomes.

Financial sector statistics and the release calendar for them

For further information:
Hanna Jürgenson
Eesti Pank
668 0959, 5692 0930
[email protected]
[email protected]