Savings continue to grow faster than loans
Economist at Eesti Pank
- The growth in incomes and savings is helping to offset the risks from credit growth
- As investment has increased, so long-term corporate debt has grown faster
Rising incomes and a broad tendency to save have led household savings to increase fast. The volume of household deposits was more than 9% larger than a year earlier. The other financial assets of households, like cash, securities, investment fund units and loans granted, have increased a little faster. Despite the rapid growth, the financial savings of Estonian households in relation to incomes are still below the European Union average.
The loan liabilities of households continued to increase at about the same rate as their incomes. Household loan liabilities were up 6% over the year in the second quarter. Growth in borrowing by households has been supported by rising wages, confidence and favourable interest rates on loans. The growth in the stock of bank loans and leases has accelerated in recent months, but the growth in loans from other creditors, which was previously very fast, has slowed. In consequence, the growth in total debt has remained the same.
In the first half of the year there was strong growth in investment by companies in fixed assets, which the companies mainly financed using their own funds. More has been taken out than before in long-term loans, and the annual growth in such loans reached 7%. Borrowing continues to be primarily from banks operating in Estonia, but long-term loans have been taken from abroad more than previously. At the same time, the stock of short-term loans has shrunk considerably, largely as a consequence of cash flow management in some foreign-owned companies. The total debt liabilities of companies were 2.7% larger by the end of the second quarter of 2017 than a year earlier.
This means that the Estonian economy was again a net lender in the second quarter, as Estonian residents invested more resources abroad than they received from there. This indicates that the trend of the last few years for Estonian residents to save continues, and the level of investment in fixed assets remains relatively low despite the growth in the past two quarters.
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