Corporate debt ratio varies across the euro area
The corporate debt ratio in the euro area has increased considerably since 2000 and rose to 132% of the euro area’s gross domestic product in 2017.
11 July 2018
The corporate debt ratio in the euro area has increased considerably since 2000 and rose to 132% of the euro area’s gross domestic product (GDP) in 2017 (see Chart 1). After a peak of 137% in the first quarter of 2015, the corporate debt ratio in the euro area has generally been declining.
Looking at the corporate sector country by country, the debt ratio indicates different financial structures. You can see how your country compares using the interactive chart below. This “Insight” is based on non-consolidated data.
Chart 1 – Corporate debt ratio, measured as a percentage of GDP
Although the composition of corporate debt varies among countries, loans are by far the most widely used instrument. On average, 68% of total euro area corporate debt consists of loans (see Chart 2). Trade credits are also important in some countries, e.g. Lithuania (42%) and Slovenia (33%), and debt securities represent a significant share of the debt in other countries, e.g. France (17%) and Portugal (13%).
On average, the indebtedness of the euro area corporate sector has increased over the past ten years (see Chart 3). Nevertheless, the financial saving of the vast majority of euro area countries has increased (even quite significantly in some cases). The number of countries with a positive financial saving (those to the right of the vertical axes in Chart 3) has increased from 4 to 13.
The financial accounts statistics
The sector accounts provide a comprehensive and comparable overview of an economy as a whole and by sector. They provide a systematic description of the seven different stages of the economic process: (i) production, (ii) generation of income, (iii) distribution of income, (iv) redistribution of income, (v) use of income and (vi) financial and (vii) non-financial accumulation.
The sector accounts consist of the financial and non-financial accounts. The financial accounts statistics show the financial balance sheet of the sectors broken down by financial instrument and how sectors obtain the necessary financial resources or allocate their surpluses. The statistics also track financial transactions within the economy and other flows, mainly revaluations, which are changes in the market prices of financial instruments between two given periods.
The financial accounts are an important source of information and are widely used in both monetary policy analyses and financial stability analyses of the economy, its sectors and their interactions.
The production of euro area and national statistics is based on the European System of National and Regional Accounts 2010 (ESA 2010), the international standard and analytical framework that make it possible to compare statistics across countries.
This “Insight” into euro area statistics is based on the unconsolidated financial accounts statistics. The analysis focuses on the corporate debt ratio, measured as a percentage of gross domestic product (GDP) (see Chart 1), the composition of corporate debt (see Chart 2) and corporate debt and financial saving, measured as a percentage of GDP (see Chart 3).
In statistical terminology, corporates are referred to as non-financial corporations and are covered by sector S.11 of the ESA 2010.
Debt includes loans, debt securities that have been issued, trade credits that have been obtained and pension scheme liabilities. It also includes debt issued by corporates and held by other corporates, such as debt within the same corporate group.
Financial saving is one of the main results in the financial accounts. It is the difference between the investments made in financial assets in a given period and the liabilities taken on in the same period (i.e. transactions). Financial saving includes all financial instruments, not only debt, and is referred to as net lending/net borrowing in statistical terminology.
Corporates can be net lenders or net borrowers:
- A positive financial saving means that corporates have lending capacity and act as net lenders (when the net acquisitions of financial assets are higher than the net incurrence of liabilities).
- A negative financial saving means that corporates have financing needs and act as net borrowers (when the net acquisitions of financial assets are lower than the net incurrence of liabilities).
The financial saving ratio is calculated as the sum of the flows of financial saving over four quarters divided by the sum of the flows of GDP over the same four quarters.
Find out more about corporates (Non-Financial Corporations) debt ratio on:
ECB Press Releases – Euro area economic and financial developments by institutional sector
ECB – Debt of non-financial corporations
ECB statistical data warehouse (link to the data)
Understanding financial accounts published by the OECD
Supplement to the Statistical Bulletin October 2016 on National Financial Accounts published by the Banco de Portugal
European System of National and Regional Accounts (ESA 2010)