The low investment activity is reflected in the slower growth of corporate debt

The growth of corporate debt decreased at the start of the year. In quarterly terms, the volume of loans taken and bonds issued stopped increasing by the end of the first quarter of 2015, but year-on-year, the growth reached nearly 4%. The volume of long-term loans has decreased because of moderate investment activity, both in case of loans taken from the Estonian financial sector and loans taken from abroad.

Corporate equity decreased somewhat in the first quarter. Reduced profits and relatively substantial dividend payouts meant that reinvested profits also decreased, and the growth of equity, which was fast-paced after the economic crisis, stopped. In international comparison, however, the level of equity in the Estonian corporate sector is quite high.

The incomes and savings of households are still growing faster than their loan liabilities. Higher incomes helped the cash and deposits of households to increase by 9% over the year, to 6.3 billion euros. At the same time, loan liabilities grew by 3.5% and reached 7.8 billion euros. The growth rate of both long-term housing loans and short-term loan liabilities has accelerated somewhat. The indebtedness of households as a ratio of disposable income decreased and as a ratio to GDP remained at 40%.

Like in the past five years, Estonian residents still invested or returned more funds abroad than they took in from there. This was because Estonian residents still saved more in the first quarter than they invested.

Source: Bank of Estonia

Author: Taavi Raudsaar, Economist at Eesti Pank

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