Current account surplus narrows by 34.2% y/y in Estonia

The current account surplus narrowed by 34.2% y/y to EUR40.9m in June, according to figures of the statistical office, published on Tuesday. The main driver was the services trade sector, where the surplus shrank by 2.3% y/y to EUR187.3m as exports dropped y/y, while imports increased by 0.5% y/y. On the other hand, the merchandise trade deficit narrowed by 4.7% y/y to EUR74.2m.

In 12-month rolling terms, the current account posted a surplus of EUR458.6m, down by 39.6% y/y, and accounting for 1.7% of nominal projected GDP for the year, according to our estimations. The merchandise trade deficit expanded by 9.8% y/y to EUR859.4m, underpinned by solid domestic demand, while the services trade surplus narrowed down by 1.7% y/y to EUR1.8bn. The primary income deficit expanded by 15.0% y/y to EUR560.7m, likely due to lower remittance and investment flows.

On the financing side, the capital account continued to expand to EUR458.8m in the 12-month period ending in June 2019, supported by higher absorption of EU funds. On the other hand, the financial account posted a net outflow of EUR890.9m, underpinned by portfolio investment as Estonians continue searching for higher yield abroad. Meanwhile, FDI posted an inflow of EUR602.4m, down by more than half y/y as overall investment sentiment has declined due to the economic slowdown in the region.

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