Timo Vesala, the chief economist at the Savings Bank Group, has expressed his concern about the growing debt burden of households and, especially, the increasing use of temporary debt relief instruments, such as mortgage payment holidays, in Finland.
Such developments, he warns, could become an obstacle to private consumption.
“The household saving ratio dropped almost one per cent below zero last year, meaning that household consumption by far exceeded disposable income. The saving ratio has been lower only twice in the statistical history – in 1977 and 1988,” highlights Vesala.
“The number of bad loans taken out by households has similarly been on an up-tick. This is disconcerting at a time when the use of instruments offering temporary relief from debt management, such as mortgage payment holidays, has been exceptionally high.”
Intrum Justitia, a leading provider of debt collection services, reported yesterday that over a fifth (21%) of consumers have borrowed money or used up their credit limit to pay their bills.
Its survey also found that up to a fifth of consumers are constantly struggling to pay their bills on time. The most common solution to such difficulties is to borrow money from friends or family, but almost a quarter of respondents (24%) revealed that they have turned to payday loans and almost a fifth (19%) that they have taken out a loan from their bank in order to pay their bills on time.
“The statistics seem to indicate that the financial difficulties unfortunately tend to accumulate around the same people and be resolved slowly,” commented Juha Iskala, the head of sales and marketing at Intrum Justitia.
Vesala also estimates that private consumption could continue to grow strongly in spite of the unfavourable developments.
“The preconditions for consumer demand to continue to grow strongly remain favourable: consumer confidence is historically high, even to the extent that it is scary, employment is growing at a faster rate, and purchasing power is increasing despite gradually accelerating inflation,” he explains.
Statistics Finland has reported that its consumer confidence indicator stood at 23.0 in November – well above the long-term average of 12.2.
Aleksi Teivainen – HT
Photo: Antti Aimo-Koivisto – Lehtikuva
Source: Uusi Suomi