Estonian gross debt level was 10 pct of GDP in 2015

According to the adjusted data of Statistics Estonia, in 2015, the Estonian general government surplus was 0.1% and the gross debt level was 10.1% of the gross domestic product.

At the end of 2015, the total revenues of the general government exceeded the expenditures by 27.2 million euros, accounted as the Maastricht deficit criteria. After a methodological change in the recognition of the contributions to the new public enterprises, the deficit of the central government sub-sector was 52.1 million euros by the end of 2015. The consolidated budget of the local government sector was 55.9 million euros in surplus. The budget surplus of social security funds was 23.4 million euros.

The consolidated debt of the general government (Maastricht debt) amounted to 2 billion euros by the end of 2015. Compared to the preliminary estimate published in March, the central government’s debt compilation was adjusted. From 2012 onwards, the statistical recording of the monetary resources on the Treasury’s group accounts were changed. As a result of this adjustment the central government’s total debt rose to 2.2 billion euros by the end of 2015, caused by the added liabilities towards other subsectors of the general government. This change in accounting of monetary resources of subsectors did not affect the consolidated debt of the general government.

Also, a change was introduced in the statistical recording of the Estonian euro coins, giving rise to the debt level of both the central government subsector as well as the general government  sector by 41.4 million euros at the end of 2015.

The local governments’ debt remained unchanged and accounted for 0.7 billion euros. Social security funds did not contribute to the debt of the general government sector. Changes in accounting were made according to the instructions of Eurostat.Diagram: Surplus/deficit of the general government in Estonia by sub-sectors, 2011–2015

In Estonia, the general government sector comprises three sub-sectors: 1) central government (state budget units and extra-budgetary funds, foundations, legal persons in public law); 2) local governments (city and rural municipality governments with their subsidiary units, foundations); 3) social security funds (Estonian Health Insurance Fund, Estonian Unemployment Insurance Fund).

Source: Statistics Estonia

See better graph here

The current account surplus was smaller in July than a year ago

The flash estimate1 put the Estonian current account at 45 million euros in surplus in July 2016. The surplus on the goods and services account was 86 million euros, which was 14 million euros less than at the same time a year earlier. The decline of 4.5% in goods exports was faster than the 2.4% in imports, and this increased the deficit on the goods account to 124 million euros. The surplus on the services account is usually at its peak for the year in July because of the tourism season, and the surplus in services was high this year too at 210 million euros. Exports of services were brought down by transport services and boosted by travel services and other services, while imports of all the main types of services increased. The inflows of investment income and other income declined while outflows increased. The net outflow on the primary and secondary income accounts totalled 41 million euros, which was 20 million euros more than at the same time a year earlier.

The sum total of the current and capital accounts was 57 million euros in July. This means that the Estonian economy was a net lender to the rest of the world, so the country as a whole invested more resources abroad than it received from there.

Eesti Pank publishes the flash estimate of the balance of payments monthly for the last month but one. Eesti Pank will publish the balance of payments for the third quarter of 2016 on 9 December 2016.

See a bigger graph from Bank of Estonia website

Estonia’s Health Insurance Fund works with a big loss

For 2016, the government budgeted a loss of around €9m. This gap in the fund’s finances would then have been covered using some of its reserves. But after the first half of the year, the fund is already running at a €33m loss, and about to become a factor in the bugdet discussions for next year.

This loss occurs despite the fact that the number of people insured by the fund has decreased by 15,392 and that revenue from social tax allocated to healthcare has grown by €12.6m, daily Postimees wrote on Friday.

Source: ERR News

The current account surplus was in surplus in May

The flash estimate1 put the Estonian current account at 51 million euros in surplus in May 2016. The surplus on the goods and services account was 64 million euros, which was 51 million euros less than at the same time a year earlier. As goods exports were up 5% over the year and imports were up 10%, the faster growth in imports led the deficit in goods to widen to 105 million euros. The positive balance for services was close to its level of last year at 168 million euros. Exports of services were brought down by transport services and boosted by other services, while imports of transport services increased and those of other services declined. The net outflow of investment income and other income in the primary and secondary income accounts was 12 million euros in May, which is 4 million euros more than a year earlier. This was primarily because less was used in investment and other support from the European Union funds than a year previously.

The sum total of the current and capital accounts was 64 million euros in May. This means that the Estonian economy was a net lender to the rest of the world, so the country as a whole invested more resources abroad than it received from there.

See the graph on Bank of Estonia website

Banker emphasised to the parliament the importance of a balanced budget

Governor of Eesti Pank Ardo Hansson told the Riigikogu on May 3, 2016 that the Estonian government has acted correctly by keeping its budget in balance, as now is not the time from the economy’s perspective to increase spending significantly.

He explained that the central bank does not give an opinion on the total amount of income and expenditure in the state budget, nor on how the spending is shared out. “As a central bank we cannot say whether it is right or wrong for the government to spend its money on one thing or another. We talk about balance under the present circumstances, as we see that there are tensions in the labour market. We do not see any reason right now to start a wider stimulus of the economy given that several companies are already on the limit of profitability. If wages start to rise a lot faster than productivity, companies may start to go bankrupt at some point. Eesti Pank considers it more important to focus on structural reforms that would give a more solid foundation for faster wage growth”.

Governor Hansson said that it was necessary when planning the budget to assess whether the Estonian economy is in recession. “Estonia could spend and borrow more if all the economic indicators were showing that the economy is in recession. Right now the messages from those indicators are quite contradictory. Looking only at the speed of economic growth, it appears that growth is quite slow. In contrast, the labour market is overheated, and if you ask businesses where they see tight spots, most of the discussion is centred around labour shortages. By increasing government spending we would be adding fuel and stoking an already overheated labour market.”

He noted that the state fiscal position has in some ways been surprisingly strong as there has been a rapid rise in tax revenues, which make up a large part of the state’s income. “Value added tax and labour tax revenues have grown rapidly as wages have risen and retail sales have gone up fast. Things will be harder in future because we will receive less money from the European Union as we become richer, while our demographic situation will become worse, needing us to spend more on pensions and healthcare while there are fewer employees paying taxes. Looking at both the short term and the long term, now is not the right time to start spending more money”.

Source: Bank of Estonia

Estonian current account was in deficit in February

The flash estimate1 put the Estonian current account at 42 million euros in deficit in February 2016. This was mainly because the deficit on the goods account was larger than in February 2015. Although exports of goods were some 2.5% up on a year earlier, imports were up 5.6% over the same period. The small increase in the surplus on the services account was not enough to offset the deficit on the goods account. Total spending by Estonian residents on foreign travel in February was more than spending by non-residents visiting Estonia, meaning that the balance on the travel services account was negative. Flows of transport services declined further, while exports of all other services increased and imports fell. The positive balance on the capital account meant that the total of the current and capital accounts was positive, which was not the case in January.

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 June 2016.

1 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 graph here)

Estonian gross debt level is 9.7 pct of GDP

According to the preliminary data of Statistics Estonia, in 2015, the Estonian general government surplus was 0.4% and the gross debt level was 9.7% of the gross domestic product.

At the end of 2015, the total revenues of the general government exceeded the expenditures by 84.1 million euros, accounted as the Maastricht deficit criteria. By the end of 2015, the surplus of revenues of the central government sub-sector was 12.7 million euros. The consolidated budget of the local government sector was 47.6 million euros in surplus. The budget surplus of social security funds was 23.9 million euros, which is considerably smaller than in previous years.

The consolidated debt of the general government (Maastricht debt) amounted to 2 billion euros by the end of 2015, having fallen 4% compared to 2014. The local governments as well as the central government contributed to the fall of the debt level. At the end of 2015, the debt of the central government sub-sector totalled 1.4 billion euros and the local governments’ debt accounted for 0.7 billion euros. As in previous periods, social security funds did not contribute to the debt of the general government sector.

The loan liabilities of the central government decreased by 4% and the volume of long-term securities issued by the public-legal institutions and foundations belonging to the central government decreased by 6%. The share of foreign debt in the central government’s loan liabilities was 85%.

The Estonian involvement in the European temporary rescue mechanism, EFSF (European Financial Stability Facility) decreased by 30 million euros in 2015. At the end of 2015, liabilities towards the EFSF totalled 454.6 million euros, 79% of which went for the participation in the rescue package for Greece, 12% for Portugal and 9% for Ireland.

The overall debt level of the local governments fell by a little over 3% compared to 2014. While the volume of long-term securities decreased by nearly one-fifth over the year, the liabilities of short-term as well as long-term loans increased. Liabilities towards the rest of the world accounted for nearly 22% of the local governments’ debt.Diagram: Surplus/deficit and debt level of the general government in Estonia, 2007–2015

In Estonia, the general government sector comprises three sub-sectors: 1) central government (state budget units and extra-budgetary funds, foundations, legal persons in public law); 2) local governments (city and rural municipality governments with their subsidiary units, foundations); 3) social security funds (Estonian Health Insurance Fund, Estonian Unemployment Insurance Fund).

Source: Statistics Estonia