Direct investment abroad by companies increased in the third quarter
- The net outflow of 254 million euros of capital was due to direct investment by non-financial companies in companies based abroad and to repayments of trade credit
- The net investment position moved in the direction of balance for the second consecutive quarter
- The volume of debt liabilities was down by 0.4 billion euros over the quarter
The financial account of the balance of payments shows that investment abroad from Estonia was 254 million euros larger in the third quarter of 2016 than investment in Estonia from abroad. The net outflow of capital was due to direct investment by non-financial companies in enterprises based abroad and to repayments of trade credit. Net lending was higher than in the second quarter of 2016.
Flows of direct investment were close to balance, like in the second quarter, and the net outflow was 41 million euros. The outflow of investment was due to investment in the equity of companies based abroad and also to the repayment by non-financial companies of loans to other companies within the same group. The inflow of investment was again based on non-financial companies and credit institutions reinvesting the profits they had earned in Estonia.
The net outflow of portfolio investment was 386 million euros, and Eesti Pank invested the most in securities, as before. The central bank bought 493 million euros of securities in the quarter and has invested a total of 2.9 billion euros in securities within the asset purchase programmes. The general government also invested 22 million euros in foreign securities.
The net inflow of other investment was 188 million euros. The net inflow was also affected significantly by the purchases of securities by Eesti Pank within the asset purchase programmes. The capital brought into Estonia by the other sectors increased the other investment assets of the central bank by 114 million euros1.
The net international investment position2 at the end of the third quarter of 2016 showed that the external liabilities of Estonian residents exceeded their external assets by 7.8 billion euros, or 38% of GDP. As external assets increased and external liabilities shrank, the investment position moved in the direction of balance by 445 million euros over the third quarter. Of this, 254 million euros was transactions with financial assets and liabilities, and 40 million euros was price and exchange rate changes (see the International Investment Position).
Statistics for the external debt show that at the end of the third quarter, the debt claims of Estonian residents on non-residents were 2.5 billion euros larger than their debt liabilities3. Debt claims were unchanged from the previous quarter and stood at 74% of all external assets at the end of the quarter, with a value of 21.6 billion euros, or 105% of GDP of the year. The volume of debt liabilities decreased by 0.4 billion euros over the quarter to stand at 19.1 billion euros, or 93% of GDP, which is 52% of all external liabilities (see External Debt).
Eesti Pank will release the statistics for the balance of payments and the external debt for the fourth quarter of 2016 and the full year 2016 together with an economic policy and statistical release on 9 March 2017 at 08.00.
1 The inflow and outflow of capital for the central bank is also affected by other sectors in which payments made or received move through credit institutions as settlements between central banks of the euro area through TARGET accounts. If the balance of Eesti Pank’s account in the TARGET system is reduced by settlements between euro area central banks, it means that money is going from Eesti Pank to the other central banks and the assets of Eesti Pank are decreasing. In the opposite case, money flows in and the assets of the central bank increase.
Securities bought within the asset purchase programme increase the portfolio investment assets of the central bank but reduce the other investment assets by the same amount because of the settlements transferred out of Estonia, so net external financing is not affected.
2 The international investment position is a consolidated balance sheet of the external assets and liabilities of all the institutional sectors of a country as at the balance sheet date at market prices.
3 Debt assets and debt liabilities are components of the international investment position that have a repayment obligation. The external debt does not include direct, portfolio or other investment in equity capital, reinvested earnings, financial derivatives, or the gold of the central bank reserves. The external debt does include the debt assets and liabilities between companies in a direct investment relationship.
Eesti Pank accompanies the release of statistics on the balance of payments, the international investment position and the external debt with a separate statistical release and an economic policy explanation.
The balance of payments statistical release focuses on analysis of the current account and the capital account. The statistical release on external financing gives more depth on the financial account, the investment position and the external debt (see External sector statistics)
Statistical releases are published by Eesti Pank together with statistical data. The release is independent of economic policy releases and is presented separately from them.
Eesti Pank Statistics Department
Telephone: 668 0725
Email: andres.lauba [at] eestipank.ee