The current account deficit widened significantly to EUR44.6m in March, compared to a deficit of EUR16.1m in March 2018, figures of the Bank of Estonia, published on Tuesday showed. The merchandise trade deficit expanded by 29.9% y/y to EUR116.4m and in addition the services trade surplus narrowed by 19.1% y/y to EUR92.8m.On the other hand, the primary income deficit narrowed, while the secondary income turned to a surplus of EUR12.8m, likely due to higher remittance flows from abroad. Meanwhile, the financial account reported a net outflow of EUR45.4m, mainly underpinned by direct investment, which recorded an outflow of EUR16.4m. On the other hand, portfolio investment marked an inflow of EUR63.6m, driven by debt securities.
In 12-month rolling terms, the current account posted a surplus of EUR375.1m, down by 45.4% y/y. The surplus represented 1.4% of nominal projected GDP for this year, according to our calculations. The merchandise trade deficit widened by 17.8% y/y, while the services surplus shrank by 4.5% y/y. The financial account reported an inflow of EUR794.6m, underpinned by portfolio and other investment. On the other hand, FDI posted an inflow of EUR1.2bn, higher by 64.3% y/y.
Looking at the latest forecasts, both the IMF expect Estonia’s current account surplus at 1.5% of GDP in 2019, while the European Commission forecasts it at 1.4% of GDP.