The growth in the surplus on the current account slowed in the third quarter

Kristo Aab
Kristo Aab
Economist at Eesti Pank

The current account surplus stood at 159 million euros in the third quarter of this year, which was equal to around 3% of the GDP of the quarter. The surplus was 67 million euros larger than in the third quarter of last year, but the growth that has been seen in the surplus since the second quarter of 2014 slowed down. The surplus on the current account has recently been caused by low investment activity levels and a reduction in the outflow of investment income. The surplus will be hindered from growing in future by weak foreign demand and a recovery in investment that mean some reduction in the surplus can be expected in the near future.

External assets grew faster than external liabilities in the third quarter year on year, but the net international investment position, showing the difference in external assets and liabilities, did not change as a ratio to GDP and remained at -38%. The Estonian net investment position has in recent quarters moved towards -35% of GDP, which the European Union considers as indicting balance. Despite this, the European Commission noted in its latest alert mechanism report that one possible source of danger for Estonia is that the net external liabilities are too large. It should be remembered in the Estonian context that more than half of the external liabilities are direct investments in the country, which are considered as a method of financing that has a lower risk of creating imbalances. With the current account close to balance, no continuous rapid improvement in the net investment position is foreseeable.

For more on the European Commission report see the Eesti Pank website (Estonian only).


Background Information

Eesti Pank compiles external sector statistics that include data on the balance of payments, foreign debt, the international investment position and foreign exchange reserves. Eesti Pank releases an economic policy comment and two statistical reviews on them:

  1. a balance of payments comment that focuses on explaining the changes in the current and capital accounts of the balance of payments (see the Eesti Pank website);
  2. a statistical comment on external financing that covers the financial account of the balance of payments, the international investment position and the external debt (see the Eesti Pank website).

Eesti Pank will release the statistics for the balance of payments and the external debt for the fourth quarter of 2015 and the full year 2015 together with an economic policy and statistical comment on 10 March 2016.

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