The current account surplus was 1.9 pct of GDP in 2015

The current account of the Estonian balance of payment was in surplus in 2015 by 394 million euros, or 1.9% of GDP, making it nearly twice as large as in 2014. The growth in the surplus was driven mainly by reductions of 16% in the deficit on the goods account and of 14% in the deficit on the primary income account, which reflects labour and investment income. The balance of the goods and services account was in surplus by 820 million euros as exports of goods and services fell by 3% and imports by 4%.

The goods account deficit was 837 million euros, and narrowed mainly because imports of goods fell by 5% while exports fell at a slower 4%. The decline in both exports and imports was driven primarily by machinery and equipment and mineral products. Imports of goods crossing the Estonian border were 1.1 billion euros larger than exports going the other way. Estonian merchants earned 260 million euros from the intermediation of goods in third countries. The turnover of goods under merchanting was 17% of the total turnover of the goods account of the balance of payments, which is the same as last year.

The services surplus was only 1% below the record set in 2014 and stood at 1.7 billion euros. There was no particular change in the volumes of exports and imports. Sales abroad of most services were larger than the volumes bought in, and the reduction in the surplus for some types of service was balanced out by an increase in the surplus for other types. As people from Estonia travelled abroad more, the surplus on travel services decreased. A smaller volume of construction services was imported though, so the surplus on the construction services account increased. The surplus on the telecommunications, computer and information services account also increased, while that on the transport account shrank. About 60% of the services surplus came from travel, transport and other business services, down from 75% in 2014.

The net outflow from investment and other income1 was 427 million euros, or about 10% less than in the previous year. This was mainly because the inflow of income from portfolio and other investment increased while the outflow of direct investment income remained roughly the same. The direct investment income from Estonia for non-residents and the direct investment income from abroad of residents both declined. There was a preference for withdrawing earned income as dividends, meaning that reinvested income was smaller. Somewhat more was received from the European Union institutions in production subsidies than in 2014, but payments into the EU budget also increased. The net inflow of labour income remained at the same level as last year.

The surplus on the capital account almost doubled to 404 million euros. The growth came because more emissions quotas were sold than were bought in 2015, after more had been bought than sold in 2014. The volume of capital transfers, which are mainly investment support from the European Union Structural Funds, remained the same.

The net total of the current and capital accounts, or net lending (+) or borrowing (-), saw a surplus of 798 million euros. This means that the Estonian economy was again a net lender to other countries. A more detailed presentation of the statistics on foreign financing can be found on the Eesti Pank website

1 Net flow is inflow minus outflow. If the inflow exceeds the outflow, there is a net inflow, if the outflow exceeds the inflow there is a net outflow.

Current account, % of GDP

Net lending (+) and net borrowing (-) / total current and capital account, % of GDP

See better graph from the website of the Bank of Estonia

The current account was in deficit in January

The flash estimate1 put the Estonian current account at 55 million euros in deficit in January 2016. This was mainly because the deficit on the goods account was larger than in January 2015. Exports of goods were some 9% down on a year earlier, while imports were up 2.4% over the same period. One factor affecting imports of goods was the acquisition of fuel stocks, as it was known that excise on fuel was due to rise. Exports of services increased, while imports were at the same level as in January 2015. Flows of transport services declined, while exports and imports of all other services increased. Even though the capital account balance was positive, the total of the current and capital accounts was negative. This means that the Estonian economy was a net borrower from the rest of the world, so the country as a whole received more funds from abroad than it invested there.

Eesti Pank is publishing the flash estimate of the balance of payments monthly for the last month but one. Eesti Pank will publish the balance of payments for 2016 on 9 March 2016.

The quarterly balance of payments is compiled from a combined system of representative primary data sources, including surveys of companies, while the monthly balance of payments draws from a considerably smaller database. Although the monthly report uses as much data available for the month reported as possible, including administrative data sources and reports on international payments, it is subjective to a certain degree, which is why it is called an estimate. Once the quarterly balance of payments is released, the monthly balances of payments are adjusted accordingly.

Source: Bank of Estonia (see better graph here)