Companies' increased foreign borrowing led to greater indebtedness in the first quarter

Jana Kask
Deputy Head of the Financial Stability Department of Eesti Pank

The debt liabilities of Estonian companies (loans and issued debt securities) grew by 1.4% in the first quarter compared to last year. Over the quarter, total corporate debt increased by 444 million euros, which is one of the largest quarterly growths of the past years. The majority of the growth was caused by an increase in foreign borrowing; a significant part of the latter was made up of the issue of new bonds in the infrastructure sector. The share of foreign debt liabilities in total corporate debt increased somewhat and reached 37% by the end of the quarter. 

Corporate leverage remained unchanged in the first quarter, as both equity and debt continued to grow. The debt-to-GDP ratio, which had been decreasing for a year, went up slightly over the quarter – from 85% to 87%. 

The financial assets of households are still increasing at a faster pace than debt liabilities. Compared to last year, households' financial assets increased almost 10% in the first quarter, while the growth of debt liabilities picked up speed and reached 1.2%. The indebtedness of households as a ratio to GDP remained at 41%.

The Estonian economy as a whole was a net borrower in the first quarter. This means that more funds were taken in from abroad than invested there. A negative balance is quite typical of the first quarter, but larger than usual corporate foreign borrowing also had a considerable impact. 

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