Estonia. The volume of credit added during the first six months of
2008 was nearly 50 percent below that for the first half of
2007.
Growth slowed across all
sectors, but was particularly evident in real estate which
previously had benefited the most from Estonia’s earlier period of
rapid expansion.
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Bank of Estonia said that loan demand is normally less active
during the summer but this year was also inhibited by tighter
lending conditions due to rising international interest rates and
the more careful attitude of potential borrowers. The bank
cautioned that it is possible that economic growth will be negative
this year, but it expects a recovery in 2009.
In the second quarter of 2008, the net profit of banks was 80
percent higher than in Q1, although they included several one-off
earnings. Factors having a negative impact on banks’ profitability
were growing funding costs and increased provisions.
The volume of overdue loans continued its upward trend, and a
further deterioration of quality is anticipated, although not to
the extent of hindering a smooth economic adjustment or causing
serious problems in the financial sector.
New leasing business in 2007 by members of the Estonian Leasing
Association was up 15 percent at €1.5 billion, but markedly down on
2006’s 31 percent increase, reflecting a cooling economy.
Nevertheless, the portfolio grew by 20 percent to €2.6 billion
at the year end. The association’s target for 2008 is new sales
growth of 10 percent and a portfolio increase of 15 percent.
The association reported last month that value-added product and
customer-orientated services are coming to the fore and are among
the short-term challenges facing Estonian leasing companies.
Margaret Waldren
