In 2015 Estonia was again a net lender to other countries. Net external funding was made up of the investments of pension funds in securities and the claims of the general government against the European Union. Pension funds invested 224 million euros in foreign securities, while the foreign claims of the general government increased by 225 million euros because of targeted financing from the structural funds and agricultural subsidies that remained undistributed. The portfolio investment claims of the central bank also increased by one billion euros as part of the asset purchase programme. This did not affect net foreign financing though, as the amount spent within the asset purchase programme reduced the imputed cash stock, or the central bank’s claims from other investment. The amounts distributed to credit institutions and other sectors in settlements increased the central bank’s claims through the TARGET accounts by a total of 623 million euros¹. The only sector to bring capital into Estonia was the banking sector, as credit institutions had a capital inflow of 368 million euros.

Unlike in 2014, the outflow of direct investment was larger than the inflow, by 88 million euros. This was because intra-group loan obligations decreased for non-financial companies and credit institutions made extraordinary dividend payments. The net outflow from portfolio investments totalled 529 million euros. On top of the bond investments by the central bank, pension funds invested 224 million euros in securities, mainly in fund units and bonds issued in the euro area. The portfolio investments of credit institutions contracted by 832 million euros however.

The net outflow of other investment was 385 million euros. Non-financial companies reduced their liabilities related to trade credit by 347 million euros. It was noticeable in the last two quarters that liabilities to low-tax countries in relation to deposits had decreased.

The net international investment position² at the end of 2015 showed that the external liabilities of Estonian residents exceeded their external assets by 8.2 billion euros, or 40% of GDP. As external assets increased by more than external liabilities, the investment position moved in the direction of balance by 301 million euros over the year. This was mainly driven by growth in the short-term claims of the general government and in the securities investments of pension funds, and by lending by financial intermediation companies (see the international investment position).

The Estonian external assets position was 3.5% larger than a year earlier at 28.3 billion euros. The increase in claims of 0.7 billion euros was helped by a rise of 0.3 billion euros in their value because of changes in prices and exchange rates. The external liabilities position was 0.2% larger than a year earlier at 36.6 billion euros. The volume of external liabilities fell by 0.2 billion euros because of external transactions, but increased by 0.9 billion euros because of non-transactional changes.

At the end of the year, the debt assets of residents were 2.2 billion euros larger than the debt liabilities against non-residents, which is the gross external debt³. Debt assets increased by 273 million euros over the year to stand at 75% of all external assets, with a value of 21.3 billion euros, or 104% of GDP. The volume of debt liabilities increased by 0.2 billion euros over the year to stand at 19.1 billion euros, or 94% of GDP, which is more than half of all external liabilities. The gap between the debt positions remained the same as last year. The net external debt increased for credit institutions and non-financial companies and shrank for other financial intermediaries and the general government (see external debt). There was no major change in the intra-group debt liabilities of direct investment groups, but debt assets shrank by 697 million euros.

Eesti Pank will release the statistics for the balance of payments and the external debt for the first quarter of 2016 together with a comment on 9 June 2016 at 08.00.

¹ The inflow and outflow of capital for the central bank is affected by the activities of 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 cask stock imputed from settlements between euro area central banks increases for Eesti Pank, it means that money is coming to Eesti Pank from the other central banks and the assets of Eesti Pank are increasing. In the opposite case, money flows out and the assets of the central bank decrease.

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.

Background Information

Eesti Pank is accompanying the release of balance of payment and external debt statistics with a separate statistical press release and an economic policy comment, which can be found on the Eesti Pank website.

The balance of payments statistical comment focuses on analysis of the current account and the capital account. The statistical comment on external financing gives more depth on the financial account, the investment position and the external debt (see External sector statistics).

For further information:
Andres Lauba
Eesti Pank Statistics Department
Telephone: 668 0725
Email: [email protected]