Estonians increasingly prosperous by business

Tõnis Oja
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With Estonia’s economic growth sluggish last year – and sub-zero since 1st quarter of 2014 – household financial assets have performed a decent year-on-year rise.

Eesti Pank data says that in 1st quarter, household’s financial assets grew by 10 percent to €20.3bn. Statistical Office says Estonia has 600,000 households, so it’ll be €33,818 per family.

Enterprisingness rising

For the increase of assets, the reasons are varied. A major one, perhaps, would be increased participation by households in share capital of companies registered in Estonia.

«Lion’s share of financial asset volume and its recent growth comes from household holdings in own capital of Estonia-registered enterprises,» said Eesti Pank financial stability department deputy head Jana Kask. «The relatively large input of equity capital investments into increase of financial assets of households and enterprises has been supported by the rising profitability of companies – 10 percent year-on-year in 1st quarter, according to Statistical Office.»

In the boom times and after the financial crisis, Estonia has added significant numbers of domestic companies. While in 2005 Estonia had 44,000 companies, by 2012 the number was up at almost 70,000. According to the central bank, household-owned enterprises are valued at €11.6bn, which is 57 percent of value of household assets.

The households’ second largest financial asset are savings i.e. cash and deposits. During 12 months, volume of cash and deposits went up 9 percent to €5.7bn. An average family would have €9,540 in deposits.

Money left over

As for net financial assets, with liabilities like loans and leases subtracted, these have increased even more – by 17 percent to €12.7bn.

After the financial crisis, Estonians have been cautious with loans. Year-on-year, the households’ loan burden has stayed flat at €7.55bn i.e. average loan per family is about €12,500.

«Since 2009, the household balance sheet has been constantly improving: while at the end of 2008 household loan obligations were double their liquid financial savings, by end of 1st quarter 2014 the cash/ obligations ratio had risen to 80 percent,» explained Ms Kask.

Earlier, SEB private persons chief Triin Messimas has stated that private financial assets have, by waves and with the occasional setback, been in a constant upward trend. «The fastest growth was in 2005–2008, and then again accelerating since the end of 2010 – as the economic environment improved,» Ms Messimas has explained.

According to Eesti Pank chief financial stability specialist Taavi Raudsaar, household incomes have begun to be impacted by rapid wage rise and the slowing inflation – and people have begun to have more money to spare.  

Saving needs a push

According to a poll by TNS Emor, percentage of households with savings rose to 56 last year, while 55 percent had money left over after essential spending. The trend is positive even among the least privileged segments like pensioner-families and inhabitants of Ida-Viru County.

At that, people tend to be a bit helpless and indecisive. As shown by a recent Praxis study on savings habits, they do want to save but to start doing that external pressure is needed.

The report said a helping hand or a trigger is needed to develop a habit to save money. «When talking to the people, it was evident they stood ready to set money aside but many were lacking the click of the trigger,» said Maris Rell, an analyst involved in the research.

«It could come by a bank offering sensible products, or from the inside by a negative experience. After the recession, many did have their click and afterwards they started to save,» she added.

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