Relatively low investment activity in Estonia

  • Relatively low investment activity meant that savings grew faster than debt liabilities did
  • Corporate profits have fallen and both resident and non-resident owners have increased dividend payouts
  • The income and savings of households have increased faster than their debt liabilities

The saving of Estonian households, companies and general government was more in the third quarter of last year than their investment and so the Estonian economy as a whole was a net lender to the rest of the world. This means that as in the past six years, more funds were invested abroad or returned there than were taken in from abroad. Relatively low investment activity meant that savings again grew faster than debt liabilities did

The debt liabilities of non-financial companies increased in the third quarter by around 2% over the year. Annual growth in short-term corporate loan liabilities remained relatively fast at around 7% a year. Growth was fast mainly because company inventories and the turnover of retail companies were growing. The liquid financial assets of companies, in the form of cash, deposits, short-term loan assets and securities, increased at the same time by around 7%.

Corporate equity has decreased slightly in recent years. Corporate profits have fallen and both resident and non-resident owners have increased dividend payouts. In consequence, reinvested earnings have shrunk, and the rapid growth in equity that followed the economic crisis has come to an end. The level of capitalisation in the Estonian corporate sector is still quite high in international comparison.

The income and savings of households are still increasing faster than their debt liabilities. Higher incomes helped the cash and deposits of households to increase by around 9% to 6.5 billion euros. Debt liabilities increased by 4.5% to 8.1 billion euros at the same time. Loan growth is mainly being led by growth in long-term housing loans, but there has also been an increase in the volume of car leases.

Source: Bank of Estonia

Author: Taavi Raudsaar, Economist at Eesti Pank

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: