Analytics, Banks, Estonia, Financial Services

In the second quarter, the surplus on the current account of the balance of payments was 118 mln euros, equaling 1.8% of GDP. The surplus arose from the positive balance of exports and imports of services and support from the Structural Funds of the European Union, the Bank of Estonia said.

The surplus on the services account in the second quarter increased by 5% over the year to 559 mln euros, with growth occurring primarily in computer and other business services. The goods deficit increased by 16% over the year to 332 mln euros. It grew mainly because of an increase in imports of mineral products, electrical equipment and mechanical machinery.

The net outflow of investment income was 231 mln euros, 7% less than the year before. The outflow was mainly reduced by growth in the income of pension funds because of their investment in foreign securities, and a decline in the net outflow of the direct investment income of financial companies. The surplus on the capital account was 38 mln euros. Almost half as much again was received in investment support as in the second quarter of 2017.

The net total of the current and capital accounts saw a surplus of 155 mln euros in the second quarter. This meant that the Estonian economy was again 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 36 mln euros larger in the second quarter of 2018 than investment in Estonia from abroad.  The net capital outflow was primarily a consequence of investments in foreign securities by insurance companies and pension funds. The net outflow of investment through the banking system was 805 mln euros and occurred through growth in resident deposits, which allowed the banks to reduce their foreign liabilities and increase their foreign assets.

The growth in client deposits came from investment in companies and from the current account, as high levels of exports led more money to flow into companies, which they deposited in banks operating in Estonia. The inflow of direct investment was 762 bn euros bigger than the outflow. A large part of the inflow of investment came from the sale of shares in businesses by residents to non-residents.

The net international investment position at the end of the second quarter of 2018 showed that the external liabilities of Estonian residents exceeded their external assets by 7.2 bn euros, or 29% of GDP for four quarters.

Statistics for the gross external debt show that at the end of the quarter, the debt assets of Estonian residents from non-residents were 3.9 bn euros, or 16% of GDP for four quarters, larger than their debt liabilities. Both debt assets and debt liabilities grew during the quarter.