The options for funding for companies are good
The options for funding for Estonian companies are good. The growth in liquid assets has improved the capacity of companies to fund their activities and make investments using their own funds. Their access to external funding also remains good. Companies say that the accessibility of bank loans deteriorated a little in 2018, but the availability of non-bank lending has improved. Access to funding is supported by the strong financial position of companies and by improvements in their credit histories, and also by the very low monetary policy interest rates.
Corporate debt liabilities increased by a little over 5% in 2018. The Eesti Pank December 2018 forecast expects that corporate debt liabilities will grow a little faster in 2019, but the growth will then slow and will remain below 6%.
Rising incomes are boosting household savings, and more households are able to borrow. Household assets and loan liabilities have also increased. The growth in borrowing is supported not only by rising incomes but also by low interest rates. The Eesti Pank December forecast expects the yearly growth in household debt liabilities will slow to around 6% in the years ahead. The share of families with savings has increased, but the savings they have built up are still quite small in size. Many families do not have sufficient financial buffers to cover them in an emergency.
The changes in the Estonian banking market have had an effect on the financing of banks and their credit supply. Competition has weakened for some loan products, which partly explains why average interest rates have risen slightly on corporate loans and on new housing loans. The capacity of the banks to supply credit is generally good. Although borrowing has been active, the issue of new loans is largely covered by repayments of earlier loans and the growth in deposits. As bonds come to play a larger role in financing the banks, the funding and credit supply of the banks is being affected increasingly by events in international financial markets, in addition to developments in banking and the economies in the Nordic countries.