The external balance of the Estonian economy deteriorated in 2017

  • The current account surplus of 734 million euros in 2017, or 3.2% of GDP, was around twice as large as that of 2016. This was because of the record surplus in the export and import account for services and other income transfers to companies from other countries.
  • The net outflow of capital1 in the surplus on the current account was 1 billion euros and mainly reflected investment by pension funds in foreign securities.
  • The international investment position showed that at the end of the year the financial liabilities of Estonian residents exceeded their financial assets to the rest of the world by 7 billion euros, or 30% of GDP. The investment position has been improving by moving in the direction of balance since 2014.
  • The debt claims of Estonian residents on non-residents were 3.9 billion euros larger at the end of the year than the debt liabilities to them, and were equal to 17% of GDP. The volume of debt assets increased by 1.6 billion euros over the year, and the volume of debt liabilities by 141 million.

The current account of the Estonian balance of payments was in surplus by 734 million euros in 2017. This was again due to growth in the surplus on the services account and a net inflow of secondary income. The surplus in services was 1.9 billion euros, which was 19% more than in 2016. The surplus was increased primarily by computer services and travel services and passenger transport by air. The goods deficit increased by 10% over the year to 870 million euros. It grew mainly because of a drop in exports of electrical equipment and net exports of goods under merchanting and a rise in imports of transport vehicles and mineral products including fuels. The net outflow of investment income remained at the same level as in the previous year. The surplus on the capital account was 181 million euros and fell by 20% over the year. This was mainly because of large purchases of emissions quotas, while investment subsidies increased by around one fifth at the same time. The surplus in secondary income was boosted by fines received.

The net total of the current and capital accounts, or net lending (+) or borrowing (-), saw a surplus of 915 million euros in 2017. This meant that the Estonian economy remained a net lender to other countries, so the country as a whole invested more financial assets abroad than it received from there.

The financial account of the balance of payments shows that investment abroad from Estonia was 1 billion euros larger than investment in Estonia from abroad. The net capital outflow was primarily a consequence of investments in foreign securities by pension funds. In previous years pension funds invested primarily in units in investment funds, but in 2017 they mainly invested in equity and debt securities. The net outflow of investment through the banking system, which means credit institutions and Eesti Pank, was 1.2 billion euros. This happened because of structural changes in credit institutions and growth in client deposits. The structural changes at banks reduced the liabilities of credit institutions to parent banks, while companies replaced their loan liabilities from resident credit institutions with liabilities to foreign credit institutions. The growth in client deposits came from the surplus on the current account, as growth in exports led more money to flow into companies, which they deposited in banks operating in Estonia. The inflow of direct investment continued to exceed the outflow. The inflow of investment increased because of investments in equity by credit institutions and because non-financial companies reinvested the profits they had earned in Estonia.

The net international investment position at the end of 2017 showed that the external liabilities of Estonian residents exceeded their external assets by 7 billion euros, or 30% of GDP. During the year the investment position moved in the direction of net balance by 873 million euros.

Statistics for the external debt show that at the end of the year, the debt claims of Estonian residents on non-residents were 3.9 billion euros, or 17% of GDP, larger than their debt liabilities. Both debt assets and debt liabilities increased during the year.

For more detail on the financial account, the international investment position and the external debt see the external sector statistics.

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1 Net flow is inflow minus outflow. If the inflow exceeds the outflow, there is a net inflow, if the outflow exceeds the inflow there is a net outflow.

Eesti Pank will release the preliminary statistics for the balance of payments, the international investment position 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.


Background Information

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 statistical release on the balance of payments describes the main changes in the balance of payments, the international investment position and the external debt. The release is independent of economic policy releases and is presented separately from them.

Additional information:

Andres Lauba

Eesti Pank Statistics Department

Telephone: 668 0725

Email: andres.lauba [at] eestipank.ee