The current account deficit has come close to balance
Data released today show that the current account of the balance of payments had a very small deficit of 13 million euros or 0.3% of GDP. The first-quarter current account deficit has averaged 8-9% of GDP over the past 15 years. There is a great difference from the period before the crisis, which could be because the current account position has improved due to the economic cycle, or because of long-term changes.
The cyclical effect has probably been significant, and in the near future the current account will move to a larger or smaller deficit. The ratio of investment to GDP is around ten percentage points smaller than during the boom, and the profitability of foreign-owned companies also remains below its historical level. This has caused a smaller outflow of investment revenues and so a smaller deterioration of the current account position. Increased investment activity clearly leads to a current account deficit, but it increases the chances that the average income level in Estonia will approach the average of the older euro-area members and does not mean that the economy has deviated from a balanced path. Data for the balance of payments and the international net investment position also show that Estonia remains a net lender to the rest of the world, meaning that there is funding capacity for larger investment.
Economic forecasts in the last six months by Eesti Pank, the European Commission, the OECD, the IMF and the Ministry of Finance expect the current account position for this year to be between -1 and +1% of GDP.
Eesti Pank compiles external sector statistics that include data on the balance of payments, foreign debt, the international investment position and foreign exchange reserves. Eesti Pank releases an economic policy comment and two statistical reviews on them:
1) a balance of payments comment that focuses on explaining the changes in the current and capital accounts of the balance of payments;
2) press releases covering statistics on the financial account of the balance of payments, the international investment position and the external debt or foreign funding.
Eesti Pank will release the next statistics for the balance of payments and the external debt with a statistical and economic policy comment on 8 September.