Analytics, Banks, Estonia, Financial Services, Investments

The financial account of the balance of payments shows that investment abroad from Estonia was 554 mln 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 mln 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 bln euros, and Eesti Pank invested the most in securities. The central bank invested 1.9 bln euros in foreign debt securities during the year, and other sectors invested 477 mln euros. Since 2015, Eesti Pank’s investments in foreign securities have totalled 3.3 bln euros as part of the asset purchase programmes of the European central banks.

The net inflow of other investment was 1.4 bln 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 bln 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 bln 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 mln euros over the year. Transactions with financial assets and liabilities made up 554 mln euros of this, while changes in prices and exchange rates decreased the balance by 124 mln 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 bln euros larger than their debt liabilities³. Debt assets were 0.2 bln euros larger than in 2015 and stood at 73% of all external assets, with a value of 21.5 bln euros, or 103% of GDP. The volume of debt liabilities decreased by 0.2 bln euros over the year to stand at 19 bln euros at the end of the year, or 91% of GDP, which is 51% of all external liabilities (see External Debt).