OREANDA-NEWS. May 13, 2014. SEB’s newly compiled economic analysis of households in the Baltic States indicates that everyday expenses are a problem for 22% of families in Latvia, 13% in Lithuania and 9% in Estonia.

Every fourth Latvian, eighth Lithuanian and tenth Estonian family has been in a situation where they need to delay the payment of their utility bills. 29% of families in Estonia, 42% in Latvia and 41% in Lithuania admit that they feel that their household expenses are too high.

Handling everyday living expenses

According the Statistics on Income and Living Conditions in the European Union member states, the proportion of families who are not able to cover their daily expenses differs significantly between the Baltic States. In Estonia, the figure is below the European Union average, while in Latvia the number is significantly higher than the average of the new European Union member states. In all of the Baltic States, the proportion of families in financial difficulties exceeds the pre-crisis level, while in the European Union on average, the coping ability of families was relatively stable throughout the whole economic cycle.

“While the financial assets of private persons have grown significantly as a whole, which indicates that the economic situation has improved, the recovery has not been balanced. There are still many families struggling with their daily living,” commented Triin Messimas, Development Manager of Private Loans at SEB

Delaying unavoidable payments

In 2007, nine percent of families in Latvia and Lithuania and five percent of families in Estonia struggled with their utility bills, payment plan instalments or loan payments. In 2011 the proportion of families with payments in arrears amounted to 25% in Latvia, 13% in Lithuania and 14% in Estonia. Most of the issues were related to utility bills, which is the most common type of debt among families in financial hardship. 

The financial situation of Estonian and Latvian families was the European Union average in 2012 and, for example, better than in Poland, a country not directly affected by the economic recession. The proportion of families with payments in arrears was 13% in Estonia and Lithuania, with the European Union average being 11 and the figures for Finland and France, respectively, 11 and 10 percent. The situation is worse in Latvia where 24% have payment arrears. At the same time there are still six countries in the European Union with even more families experiencing difficulties than in Latvia.

The burden of household expenses

The burden of household expenses, incl. utility bills, rent and home loan payments in the family budget is also larger than before the economic crisis. 29% of families in Estonia (with the European Union average being 37%) insist that they feel that their household expenses are too high. This means that the situation in Estonia is already rather good, but not as good as before the economic depression.

42% of families in Latvia and 41% in Lithuania – from all income brackets – admit that their household-related expenses are too high. Unable to handle the daily expenses, these families are often lacking a plausible chance to improve their current living conditions.

When compared to the residents of Latvia and Lithuania, Estonian families have more capacity to improve their living conditions while at the same time managing their day-to-day expenses and existing financial obligations. This is one possible reason why in Estonia the portfolio of home loans is growing faster than in Latvia and Lithuania.

*The Statistics on Income and Living Conditions (EU-SILC)