The current account was in surplus 3Q

The current account of the balance of payments was in surplus in the third quarter of this year, as it had been in the second. At the same time last year the current account was in deficit. The surplus of 0.4% of GDP of the quarter shows the capacity of Estonia’s economy to increase exports despite the weakness of external demand. Exports of goods and services in the third quarter were 4.4% higher at current prices than in the same quarter of last year. The main contributor to the surplus was the export of transport services. The terms of trade for services also helped turn the current account deficit into a surplus. The current account surplus also indicates that investment activity is lower than savings. The data for GDP released today show that investments in fixed capital fell by only 2% at current prices, while domestic demand increased by 5%.

Low investment activity is also indicated by the movement of capital. Although most of the profit generated in companies with foreign ownership is reinvested in the Estonian economy, there was a small net outflow of capital in the third quarter of the year. Loans granted by Estonian residents have grown faster than those they have taken since the crisis, which also reflects the repayment of loans. This trend continued in the third quarter. Loan assets are now worth 106% of GDP and exceed loan liabilities by 7.4%.

See also: The Estonian balance of payments, international investment position and gross external debt for the third quarter 2014.

Source: Bank of Estonia

Author: Andres Saarniit, Economist at Eesti Pank

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