Jana Kask, Eesti Pank's Financial Sector Policy Division, Chief specialist

The total volume of household and corporate loans and leases increased 1.3% in January 2008 with the annual growth rate constituting 29%. Like in the last months of 2007, borrowing activity remained less modest than in earlier years.

During the past six months, the growth slowdown has been more sizable as regards loans to private persons. In addition to the slowing growth rate of household loans, people have started to take out considerably less consumer credit as well. Although the consumer credit growth rate exceeded 40% due to the low calculation base, the number of new consumer loans was over 50% smaller than in January 2007.

Taking into account seasonal factors and the economic adjustment, the volume of corporate credit issued in January was relatively high. The stock of corporate loans and leasing increased by 1.7% month-on-month, and the annual growth rate steadied at 27%. The fact that the strong credit demand persists shows that Estonian enterprises are willing to invest and able to adjust to the changed economic environment.

Figure 1. The annual growth of household and corporate loans and leases in Estonia.

The loan repayment ability of Estonia's households and enterprises can still be considered relatively good, though due to the changing economic environment, the volume of overdue loans is still on the up. In January 2008, the share of loans overdue for over 60 days accounted for 0.8% of the total loan volume. The quality of household loans has been above the average with the share of loans overdue for over 60 days forming 0.6% of the loan volume.

The annual deposit growth rate stopped at 13% in January, having undergone a three-quarter downward trend. The volume of household deposits grew by approximately 800 million kroons in January, which is close to the growth of January 2007. One of the reasons for the growing deposit volume growth is the growth of deposit interest rates, which brought along an increase in time and saving deposits and a decrease in demand deposits.

The decline in the 6 months' EURIBOR, which is used by our banks as the key interest rate for loans issued, caused a fall in the average interest rate on new housing loans to the level of 5.6% in January. Meanwhile, the average interest rate of long-term corporate credit rose and reached 6.3% in January.

Figure 2. The weighted average interest rate and 6 months EURIBOR of housing loans and long-term corporate loans issued within a month.

As from January 2008, Eesti Pank publishes a monthly statement on the most relevant financial sector indicators.
The respective statistics and publication calendar are available on the web site of Eesti Pank at www.bankofestonia.info/pub/en/dokumendid/statistika/pangandusstatistika/tabelid/index.html.