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2013.11.20 10:46

Bank of Lithuania: The number of enterprises inclined to borrow is increasing

DELFI|The Lithuania Tribune2013.11.20 10:46

The Bank of Lithuania has reported that the key financial indicators of domestic enterprises have been improving, the proportion of enterprises operating profitably has been expanding, and enterprises planning development are going to borrow less cautiously.

 The Bank of Lithuania has reported that the key financial indicators of domestic enterprises have been improving, the proportion of enterprises operating profitably has been expanding, and enterprises planning development are going to borrow less cautiously.

The Bank came to these conclusions based on its conducted survey of Non-financial Enterprises on Business Financing.

“Nearly every other surveyed enterprise reported having increased its sales this year, the operations of nearly three out of four enterprises were profitable, and over a third are planning development. The number of borrowing enterprises has been growing as well,” said Kristina Grigaitė, senior economist of the Macroprudential Analysis Division of the Financial Stability Department of the Bank of Lithuania.

Service and industrial enterprises are planning to increase their development most, whereas construction enterprises – least. In the next half-year, borrowing from credit institutions is planned by enterprises across all sectors of the economy, most actively – by industrial and trade enterprises.

The Bank of Lithuania further reported that an average of 13 per cent of the development is planned to be financed from borrowed funds; the enterprises are going mainly to purchase or repair equipment, machinery, transport vehicles. Nevertheless, more than half of the surveyed enterprises reported about a sufficient amount of own funds available for financing their operations, thus they were not going to borrow from banks.

In the first half of 2013 the average annual interest rate paid by enterprises on their financial liabilities assumed was 4.2 per cent. For nearly one third of the enterprises the interest rates decreased in the first half of 2013, whereas for two-thirds of them they remained unchanged.

The number of enterprises perceiving that the credit standards have eased was larger than that of those believing that they were tightening. Major contribution to the easing of the standards stemmed from interest rates as well as a decrease in the loan-to-value ratio. Nevertheless, in the perception of most of the borrowing enterprises (over two-thirds), the credit standards remained unchanged.

Asked to specify how the problems faced in their activities will change over the next half-year, enterprises indicated an increase in production cost and strengthening competition, while the legal/administrative requirements and attraction of financing sources would not raise any serious problems.

Surveys of non-financial enterprises on business financing are conducted twice a year. Their aim is to assess the demand of non-financial enterprises for financial resources, changes in borrowing from credit and other financial institutions and developments in credit standards, as well as to receive information on changes in the financial standing and operation of non-financial enterprises. The non-financial enterprises were surveyed in September–October 2013; responses were received from 500 enterprises.

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