The current account surplus narrowed by 50.4% y/y to EUR43.3m in August, according to figures of the Bank of Estonia, published on Monday. The decrease was largely attributed to the merchandise trade deficit, which expanded tangibly by 42.6% y/y to EUR82.4m, underpinned by solid domestic demand. In addition, the secondary income balance turned to a deficit. On the other hand, the services trade surplus expanded marginally by 4.1% y/y to EUR190.8m, signaling for still strong demand from Estonia’s key trading partners. The financial account reported a net inflow of EUR10.8m. Foreign direct investment jumped sharply to EUR146.3m, signaling for investors’ strong interest in the country. Meanwhile, on the portfolio investment side an outflow of EUR107.5m was posted as Estonians searched for yield on their savings in investments abroad.
In 12month-rolling terms, the current account surplus narrowed by 10.2% y/y to EUR467.4m at end-August 2018. This was once again primarily attributed to the merchandise trade deficit, which expanded by 21.6% y/y to EUR1.2bn, while on the other hand the services trade surplus widened by 7.5% y/y to EUR1.9bn. The financial account reported an outflow of EUR544.4m, lower by 28.5% y/y, due to a lower outflow of portfolio investment. On the other hand, foreign direct investment more than doubled to EUR1.5bn. The current account surplus came in at approximately 1.9% of GDP in the 12-month period ending in August 2018. To note, the government expects the CA surplus at 2.1% of GDP in 2018, according to its updated forecast, published in September. Meanwhile, the European Commission expects the surplus at 3.0% and the IMF at 2.2% of GDP, according to its most recent forecast.