Home Borrower Economic recovery has led to growth in corporate debt

Economic recovery has led to growth in corporate debt

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The increase in investment and turnover has led Estonian companies to actively borrow again. The most active borrowers are real estate, construction, agriculture and infrastructure companies. The growth in borrowing is supported by both increased demand and better access to loans.

Rising demand, improving economic prospects and high level of use of productive resources mean that companies have increased their investments this year. As a result, the stock of loans and leases issued by banks operating in Estonia to businesses grew at a steadily increasing pace, and at the end of August the loan portfolio was 5.5% higher than that of the previous year, to 9.8 million euros. The loan portfolio grew particularly rapidly in monthly terms during the summer months.

Economic activity and borrowing have recovered differently in different sectors since the pandemic. Growth in the stock of business loans in real estate, construction, agriculture and infrastructure exceeded 10%. At the same time, however, the stock of loans to industry was only 1% higher than a year earlier, and that to retailers was even 2% lower. However, signs of increased borrowing in these sectors have emerged in recent months.

The Estonian Economic Research Institute’s survey on the lending environment found that businesses considered banks’ willingness to lend to have steadily improved, and their estimate in June was on average better than before the pandemic . Real estate companies were particularly bullish, while tourism and accommodation companies were the most pessimistic. The bank lending survey also shows that after the tightening of credit conditions in the first half of 2020, they were gradually eased over the following quarters. It is also likely that banks have become more confident in granting loans as fewer and fewer businesses face repayment difficulties. The share of bank loans in arrears for more than 60 days at the end of August fell to 0.5%. The average interest rate on business loans varies greatly from month to month, as it depends a lot on the projects financed and the borrower’s credit risk. The average interest rate on long-term business loans in 2021 of 2.8% is a little lower than the rates for the previous two years.

Please note: Eesti Pank published today on its website statistics of credit institutions and leasing companies for the month of August. The statistical publication describes the main changes in statistics on credit institutions and leasing companies, covering the volume and structure of assets, loans and leases issued, deposits and interest rates on loans and the leases. The statistical publication is independent from the economic policy publications and is presented separately from them.

Additional information:
Hanna Jürgenson
Eesti Pank
Phone. : 56920930
Email: [email protected]
Press inquiries: [email protected]

Disclaimer

Bank of Estonia published this content on September 27, 2021 and is solely responsible for the information it contains. Distributed by Public, unedited and unmodified, on September 27, 2021 12:01:05 PM UTC.


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