Corporate and household debt has started to increase faster alongside more rapid economic growth
- Companies are still borrowing mainly from banks operating in Estonia
- Household savings continued to increase faster than their debt liabilities in the first quarter
- Growth in incomes and savings helps to reduce risks arising from credit growth
Corporate debt liabilities were 2.5% larger at the end of the first quarter of 2017 than a year earlier. Investment, which grew rapidly in the first quarter, was mainly financed from companies’ own funds and loans taken from banks operating in Estonia. The amount of foreign money brought in the country in the form of equity and debt capital increased modestly. Faster economic growth caused a slight decrease in the corporate debt burden, or the ratio of debt liabilities to GDP.
The loan liabilities of households increased almost at the same rate as their incomes. Rising wages, low unemployment and low interest rates on loans all encouraged increased demand for loans from households, and their loan liabilities increased by 6%. Both housing and consumption loans from banks and loans from other lenders have increased in volume.
Household savings have also grown quickly thanks to increased incomes and a high propensity to save. The volume of household deposits and cash was 9% larger than a year earlier. There was also growth of more than a quarter over the year in the value of tradeable securities held by households – which was supported by an increase in the price of securities in particular. Despite the rapid growth, the financial savings of Estonian households in relation to incomes are still below the European Union average.
The Estonian economy was still a net lender to the rest of the world in the first quarter: Estonian residents put more funds abroad than they took in from abroad. This means that in line with the trend of the past few years, Estonian residents save a lot and the level of investment in fixed assets is low in spite of the growth in the first quarter.