• The biggest boost to the current account surplus came from exports of services
• The inflow of direct investment was at the same level as in 2016
• The threat of external imbalances has declined

The year 2017 was a successful one for the Estonian economy. The economy grew at a clearly faster rate than in previous years. Growth was boosted by the industrial sector, which is focused on exports, and by branches of the economy that serve domestic demand. The real growth in exports was less than in 2016, though this was due to a reduction in exports from one branch of industrial production. Investment finally started to increase in both the business and government sectors. Only investment by households remained the same as a year earlier. Against this background the current account surplus increased to 734 million euros, or 3.2% of GDP. The growth in passenger transport by air and information and computer services boosted the surplus in exports and imports of services by around one fifth. Alongside the growth in the surplus in the goods and services account, the surplus in the current account was also increased by fines received from abroad. The outflow of investment income was at about the same level as in the previous year, which indicates that the profit earned by companies based on foreign capital had not increased during the year.

More direct investment was made in Estonia from abroad than was made abroad from Estonia. New direct investment of around one billion euros was made in the equity capital of foreign-owned companies in 2017, which is around double the amount seen in the past four or five years. At the same time earlier investments were reduced by about the same amount, so overall there was no net flow of new money into the country. The reinvestment by non-financial companies of profits earned earlier in Estonia meant that the inflow of direct investment was still larger than the outflow, and it was at the same level as a year earlier.

Estonian assets abroad grew more than liabilities in 2017, and so Estonia was a net lender. As the current account has been in surplus for some time, there is money available in the Estonian economy that is being placed abroad more and more. In consequence, Estonia’s net international investment position, which is the difference between the foreign assets and liabilities of the country, has moved steadily towards balance. In 2017 it stood at around -30% of GDP.

Background

Eesti Pank releases an economic policy comment on the external sector statistics it collects and a statistical release on the balance of payments statistics that discusses changes in the current and capital accounts, the financial account, the international investment position and the external debt.

Eesti Pank will release the statistics for the balance of payments and the external debt for the first quarter of 2018 together with an economic policy and statistical comment on 7 June 2018 at 08.00.

For further information:
Eva Vahur
Public Relations Office
Eesti Pank
Tel: 668 0965, 533 00619