Foreign investment in Estonia in 2016 was again less than Estonian investment abroad
- The net capital outflow of 554 million euros was primarily a consequence of intra-group loans by financial intermediary companies and investments in foreign securities by pension funds
- Debt assets increased by 0.2 billion euros over the year, debt liabilities shrank by the same amount
The financial account of the balance of payments shows that investment abroad from Estonia was 554 million euros larger in 2016 than investment in Estonia from abroad. The net capital outflow was primarily a consequence of the repayment of intra-group loans by financial intermediary companies and investments in foreign securities by pension funds. Net lending was smaller than in 2015 though.
The net inflow of direct investment was 354 million euros, which came mainly from the reinvested profit earned in Estonia of non-financial companies and credit institutions. The inflow of investment was affected by the reduction in the intra-group loan assets of non-financial companies, though investment in the equity capital of subsidiaries abroad increased at the expense of this in the fourth quarter.
The net outflow of portfolio investment was 2.4 billion euros, and Eesti Pank invested the most in securities. The central bank invested 1.9 billion euros in foreign debt securities during the year, and other sectors invested 477 million euros. Since 2015, Eesti Pank’s investments in foreign securities have totalled 3.3 billion euros as part of the asset purchase programmes of the European central banks.
The net inflow of other investment was 1.4 billion euros. The net inflow was also affected significantly by securities purchased by Eesti Pank within the asset purchase programmes, which reduced the other investment claims of the central bank by 1.9 billion euros1.
The net international investment position2 at the end of 2016 showed that the external liabilities of Estonian residents exceeded their external assets by 7.8 billion euros, or 37% of GDP. As external assets increased by more than external liabilities, the investment position moved in the direction of balance by 486 million euros over the year. Transactions with financial assets and liabilities made up 554 million euros of this, while changes in prices and exchange rates decreased the balance by 124 million euros (see net international investment position).
Statistics for the external debt show that at the end of the year, the debt claims of Estonian residents on non-residents were 2.5 billion euros larger than their debt liabilities3. Debt assets were 0.2 billion euros larger than in 2015 and stood at 73% of all external assets, with a value of 21.5 billion euros, or 103% of GDP. The volume of debt liabilities decreased by 0.2 billion euros over the year to stand at 19 billion euros at the end of the year, or 91% of GDP, which is 51% of all external liabilities (see External Debt).
Eesti Pank will release the statistics for the balance of payments and the external debt for the first quarter of 2017 together with an economic policy and statistical comment on 8 June 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 (see External sector statistics) with a separate statistical release and an economic policy explanation.
The statistical release is published together with Eesti Pank’s 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