Estonian firms' courage to sell has recovered

Photo: SCANPIX

Krediidiinfo's statistics of the payment behavior of Estonian companies for the second half of 2012 show that the share of companies with a high credit risk has risen from 12 percent to 19 percent or the pre-crisis level in a year which the financial information services provider says is a sign of the recovery of businesses' courage to sell of which taking bigger risks is a part.

The sums of tax debt increased in almost all sectors by 19 percent altogether to 74 million euros. Payment defaults or debts to business partners grew by 11.6 percent year-on-year to 122 million euros.

The number of businesses in debt to the tax authority increased for the first time in the last two years, growing by 3.9 percent in annual comparison to 5,950. Nearly a half of them were construction companies. The overall number of firms in debt to another business was practically unchanged, decreasing by 0.6 percent to 4,234.

Deputy manager of Krediidiinfo Alar Jager told reporters on Tuesday that hospitality and construction remain high credit risk sectors with the share of high-risk companies reaching respectively 30 percent and 25 percent. In his words, the hospitality industry in particular is in relatively poor health as many of the businesses active in it are small which on the whole means higher risks.

The number of businesses with tax debt and payment defaults has sharply decreased in the real estate sector which is showing a vigorous recovery, Jager said. Nonetheless, the overall sum of debt to business partners has increased which Jager said shows that it is hard for companies which find themselves in trouble owing to a poor business plan to overcome their difficulties.

A strong decline in payment defaults was observed in the farming and forestry sector where many large farms have been able to solve their economic crisis-era problems with banks, Jager said. The overall sum of defaults in the sector shrank by 75 percent.

Tax debt is more of a problem for micro businesses whereas medium-sized businesses are more grappling with payment defaults, Jager said.

While the number of large companies with payment defaults has decreased by 14.3 percent and that of firms with tax debt has not changed, 5.2 percent more micro businesses owe taxes and the number of mid-sized businesses defaulting on payments has increased by 3.3 percent.

The sample of the Krediidiinfo survey includes 69,235 active businesses and is based on the data of the official payment defaults register and the Tax and Customs Board.