The outflow of investment was affected by intra-group corporate lending in the second quarter



The financial account of the balance of payments shows that investment abroad from Estonia was 236 million euros larger in the second quarter of 2016 than investment in Estonia. The net outflow of capital was caused by the intra-group loan liabilities of financial intermediation companies and non-financial enterprises. Unlike in the first quarter of 2016, the Estonian economy was a net lender in the second quarter.

  • Flows of direct investment were in balance, unlike in the first quarter, and the net outflow was 12 million euros. The outflow of investment increased because non-financial companies lent more to other companies in the same group than before. The inflow of investment increased meanwhile because non-financial companies and credit institutions reinvested the profits they had earned in Estonia.
  • The net outflow from portfolio investments totalled 764 million euros. The extended asset purchases of the European central banks increased the average volume of securities purchased by Eesti Pank to 590 million euros in the quarter. Eesti Pank has invested a total of 2.4 billion euros in securities within the asset purchase programmes. The other sectors invested 182 million euros in foreign securities,
  • The net inflow of other investment totalled 537 million euros, of which 105 million euros was money received from the European Union’s Structural Funds. The net inflow was also affected by securities purchased by Eesti Pank within the asset purchase programmes, which reduced the other investment claims of the central bank by 482 million euros1.

The net international investment position2 at the end of the second quarter of 2016 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 336 million euros over the second quarter. Transactions with financial assets and liabilities made up 236 million euros of this, and changes in prices and exchange rates accounted for 32 million euros (see net international investment position).

Statistics for the external debt show that at the end of the second quarter, the debt assets of Estonian residents against non-residents were 2.1 billion euros larger than their debt liabilities3. Debt assets were 0.9 billion euros more than in the previous quarter and stood at 75% of all external assets at the end of the quarter, with a value of 21.7 billion euros, or 106% of GDP. The volume of debt liabilities increased by 0.5 billion euros over the quarter to stand at 19.6 billion euros, or 95% of GDP, which is 53% of all external liabilities (see External Debt).

Eesti Pank will release the statistics for the balance of payments, the international investment position and the external debt for the third quarter of 2016 together with an economic policy and statistical comment on 9 December 2016 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.

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 comment and an economic policy explanation.

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).

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