Eesti Pank: Estonian businesses' borrowing power has grown

Photo: Mihkel Maripuu

Increased sales and investments have boosted the need of Estonian companies for finance, and investments using own funds, bonds and bank loans have increased alike, it appears from the Lending Review 2012 published by the Bank of Estonia on Wednesday.

Given the greater need for financing and reduced leverage, companies are more and more boldly turning to external sources of finance, it said.

As of the end of the third quarter of last year loans taken from abroad and bonds issued abroad made up one-third of the business sector's total debt liabilities. Also the turnover of short- and long-term loans grew approximately 20 percent last year. Short-term finance still accounts for over 70 percent of total loan turnover and 12 percent of debt stock.

The debt stock of Estonian businesses grew throughout the year and by December the annual rate of growth reached 5 percent, said Taavi Raudsaar, lead specialist at the central bank's financial stability department. According to the forecast published by the Bank of Estonia last fall the increase in loan turnover will slow down somewhat this year as a result of the base effect and in the coming years the sum total of outstanding debt will grow at a rate of approximately 6 percent.

By field of activity, investments grew the most in the first three quarters of 2012 in the trade sector and the construction and real estate sector, by respectively 66 percent and 47 percent. Investment growth in the industrial sector has halted and even turned negative. No major increase in investments by the industrial sector is to be expected in 2013 either, the central bank said.