Estonia, EU – Baltic States, Financial Services, Investments

The net inflow of capital was caused by direct investment in non-financial corporations and external financing for the general government from the European Union.

The last time the Estonian economy was a net borrower was in the first quarter of 2014.

The net inflow of direct investment was 127 million euros, most of which arrived in the form of intra-group debt liabilities of non-financial companies. The inflow of equity investment was smaller than usual, as banks paid out dividends in the first quarter.

The net outflow of portfolio investment totaled 517 million euros. As before, it was the central bank that invested the biggest amount of money in other countries. External investments by the central bank totaled 400 million euros and external investments by other sectors 87 million euros.

Since 2015, investments by the Bank of Estonia in foreign securities have increased by 1.8 billion euros as part of the asset purchase program of the European central banks. The net inflow of other investment totaled 563 million euros, of which 114 million euros was money received from the European Union's Structural Funds. The purchases of securities by the Bank of Estonia under the asset purchase program also had a notable impact on the net inflow, as did the settlements transferred by the other sectors to the rest of the world, which reduced the other investment assets of the central bank by 1.2 billion euros.

The net international investment position at the end of the first quarter of 2016 shows that the external liabilities of Estonian residents exceeded their external assets by 8.5 billion euros, which equals 41% of GDP. Since the reduction in external assets was bigger that the reduction in external liabilities, the negative net investment position increased by 254 million euros. Of this amount, transactions with financial assets and liabilities made up 151 million euros, price changes 39 million euros, and changes in the exchange rates 64 million euros.  

Statistics for external debt shows that at the end of the first quarter, the debt claims of Estonian residents on non-residents were bigger by 1.8 billion euros than their debt liabilities. Debt claims, measuring 20.8 billion euros, or 101% of GDP, were smaller by 0.5 billion euros than in the previous quarter and made up 75% of all external assets. The volume of debt liabilities decreased by 0.2 billion euros over the quarter to 19 billion euros, or 92% of GDP, making up 52% of all external liabilities.