Financial position of non-financial enterprises improved in the first quarter
Viljar Vald, Financial Sector Policy Division of Eesti Pank
In the first quarter of 2010, Estonia's total economy was a net lender vis-á-vis the rest of the world which was also the case in 2009. The increase in financial assets in the total economy was 1.6 billion kroons higher than in financial liabilities. The largest contribution to the increase came from non-financial enterprises and households, while financial and general government sector caused a decrease in financial assets.
The financial position of non-financial enterprises continued to improve. In the first quarter of 2010, the financial assets of enterprises increased by 13 billion kroons, including an increase of 2.6 billion kroons in deposits. The growth was mainly attributable to accounts receivable and other claims which increased by more than 8 billion kroons. On the one hand, this could suggest an increase in economic activity but on the other hand a continuation of liquidity problems among enterprises. At the same time, enterprises continued to decrease debt liabilities which fell by 1.7 billion kroons with a quarter. The equity capital of enterprises increased on account of reinvested profit, foreign investment in equity capital and shares which increased by 24.5 billion kroons in total.
The financial behaviour of households continued to be cautious. In the first quarter of 2010, the financial assets of households increased by 5.6 billion kroons and their financial liabilities decreased by 2.5 billion kroons with paying back loans. The outstanding volume of financial liabilities of households fell by one percentage point to 60% of GDP as the volume of long-term loan contracts decreased more than economy's total production.
The financial assets and liabilities of financial enterprises decreased by 15.2 and 15.7 billion kroons, respectively. The credit market activity continued to be low which caused a decrease in the share of financial sector's external financing - liabilities vis-à-vis the external sector were reduced by 10.5 billion kroons in total.
In the first quarter of 2010, the financial assets of the general government decreased by 4.2 billion kroons. The fall was mainly driven by a decrease in the prepaid claims of the EU's benefits as a result of an active use of the benefits. In terms of components of financial assets, deposits and debt securities decreased and equity increased. Compared to the previous quarter, the financial liabilities of the general government did not increase.
Figure 1. Net lending (+) and net borrowing (-) in total economy within a quarter (EEK mln)
Figure 2. The ratio of households' financial assets and liabilities to GDP
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 (+)/ net borrowing (-) is the balancing indicator of the transactions account, being the difference between transactions with financial assets and liabilities during the period under review. A sector is a net lender, if the net acquisition of financial assets exceeds the net incurrence of financial liabilities over the same period or if the decrease in financial liabilities exceeds the realisation of financial assets over the period under review.
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