Corporate foreign debt increased 16% in 2011

The annual growth of corporate debt accelerated to 1.7% by end-2011. While repaying their debts to domestic financial institutions, companies actively borrowed from abroad. The volume of foreign debt increased by 16% within the year, accounting for 34% of corporate debt by end-2011. Corporate financial assets grew 3.4%, year-on-year. The largest contributor to the growth was the increase in  the value of shares and other equity. In addition, deposits and cash held by companies increased by more than 5% compared to end-2010.

Saving has notably improved the financial standing of households. In 2011, their deposits and cash holdings increased by 665 million euro (nearly 18%). At the same time, households borrowed rather cautiously, so their debt decreased by 2.4%, year-on-year. Household indebtedness (the ratio of debt to GDP) declined to 48% by end-2011. Compared to the peak two years ago, the indebtedness shrank by 11 pp and reached the level of the start of 2008.

Estonia’s total economy has been a net lender vis-a-vis the rest of the world for the past three years. In the last quarter of 2011, the net lending amounted to 368 million euros, which is the highest level since the start of 2004. This was mainly due to the more prudent financial behaviour of households. The financial corporations’ net lending  includes returning loan resources to parent banks and accumulating liquid assets placed abroad. The general government was a net borrower in the fourth quarter, since its bank deposits and foreign bond investments decreased.} 

 

Figure 1. Corporate sector foreign debt and its share in corporate total debt

 

Figure 2. Net lending (+) and net borrowing (-) in the total economy over the quarter and the contribution of sectors to net lending

Net lending (+) and net borrowing (-) is the difference between transactions in financial assets and liabilities over the period.The net lending (+) / net borrowing (-) of the total economy shows whether the country as a whole has included external funds or allocated them abroad.

NPISHs — non-profit institutions serving households

Financial account statistics is available on the web page of Eesti Pank

Author:  Jana Kask, Head of the Financial Sector Policy Division of Eesti Pank

 Source: Bank of Estonia

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