Viljar Vald, Financial Sector Policy Division of Eesti Pank, Senior Specialist

The financial position of enterprises improved in 2010. As a result of the repayment of domestic loans, the debt liabilities of non-financial enterprises shrank by 3.3% within the year. At the same time, the financial assets of enterprises grew by 1.5%, mainly owing to deposit growth. The profitability of enterprises recovered as well, increasing their equity capital. The inclusion of credit and equity from abroad and re-lending to the group's business entities operating abroad enlivened noticeably

The financial position of households improved markedly in 2010. Household assets grew by 2.6%, to a great extent due to life and pension insurance contributions. The financial liabilities of households decreased by 3.7%, mostly as a result of the repayment of bank loans. By end-2010, household credit as a ratio to GDP accounted for slightly over 53%.

The financial position of the general government improved as well in the last quarter of 2010. Assets increased by about 850 million euros, which was mostly the result of the registration of state assets. Liquid assets, on the other hand, decreased both in the fourth quarter and during the entire year. The loan liabilities of the general government declined throughout 2010, by a total of 4%.

The Estonian economy was a net lender vis-a-vis to the rest of the world for the eighth month in a row in the last quarter of 2010. The net lending of the total economy was 296 million euros in the fourth quarter. The net liabilities of the Estonian economy decreased to 73% of GDP by end-2010.


Figure 1. Net lending (+) and net borrowing (-) in the total economy over the quarter and the contribution of different sectors

The financial accounts of the national accounts system reflect the financial assets and liabilities and respective transactions and other changes in assets and liabilities of both different economic sectors and the economy as a whole. Net lending (+) and net borrowing (-)is the balancing indicator of the transactions account, representing the difference of transactions with financial assets and liabilities made in the period under review. An economic sector is a net lender, if the net acquisition of financial liabilities exceeds the net incurrence of financial liabilities over the same period, or if the decrease in financial liabilities exceeds the materialisation of financial assets over the reference period.