External financing was affected in the second quarter by purchases of euro-area bonds and one-off dividend payments
The Estonian economy was a net supplier of external finance in the second quarter of 2015 for the fifth consecutive quarter. The outflow of capital reflected in the financial account of the balance of payments was 345 million euros as assets abroad increased by 245 million euros, with Eesti Pank continuing the purchase of euro-area sovereign bonds that had begun in March with the aim of keeping inflation in the euro area close to 2% over the medium term, while liabilities shrank by 100 million euros as companies paid one-off dividends and other financial intermediaries paid back long-term loans.
The net international investment position1 at the end of the second quarter of 2015 showed that the external liabilities2 of Estonian residents exceeded their external assets2 by 7.6 billion euros, or 38% of the GDP of the previous four quarters. Assets abroad were equal to 79% of liabilities, and the movement in the direction of balance continues (see International investment position).
Foreign countries owe more in debt to Estonia than Estonia owes abroad: the total net debt showed that the debt assets of residents were 1.2 billion euros larger than their debt liabilities2. This gap shrank by 1.1 billion euros over the quarter, as the intra-group loan liabilities of companies increased. Liabilities were also increased by one-off dividends that were announced but not paid out. The debt assets of the central bank were 3.4 billion euros larger than its debt liabilities and the intra-group debt assets of companies were 0.5 billion euros larger than the equivalent liabilities (see External debt). The surplus in the debt assets of the central bank mostly increased because banks deposited additional resources at the central bank and the central bank made purchases of bonds.
The Estonian external assets position was 1% larger than at the end of the first quarter of 2015, and 8.7% larger than a year earlier, at 28.5 billion euros. Three quarters of this, or 21.4 billion euros, was in debt assets, equal to 106% of the GDP of four quarters. The assets position increased by 0.24 billion euros because of external transactions, but it was reduced by 0.16 billion euros because of changes in prices and exchange rates.
The external liabilities position was 0.3% smaller than at the end of the first quarter, and 2.4% larger than a year earlier, at 36.1 billion euros. More than half of this, or 20.2 billion euros, was in debt liabilities, equal to 100% of the GDP of four quarters. The volume of debt liabilities was reduced by 0.1 billion euros because of the net flow of liabilities, and by 0.5 billion euros by changes in prices and exchange rates.
Eesti Pank will release the statistics for the balance of payments and the external debt for the third quarter together with a comment on 9 December.
1 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.
2 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.
From this year Eesti Pank is accompanying the release of balance of payment and external debt statistics with a separate statistical comment and an economic policy explanation.
The balance of payments 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:
Eesti Pank Statistics Department
Telephone: +372 668 0725
Email: andres.lauba [at] eestipank.ee