The current account surplus rose by 38% y/y to EUR108.4m in May, according to figures of the statistical office. This was largely driven by a 37.9% y/y decline in the merchandise trade deficit for the same period of time as exports growth rose at a stronger pace compared to imports growth.
In 12-month rolling terms, the current account registered a surplus of EUR515m, down by 33.1% y/y, and accounting for 1.9% of GDP, according to our estimations. The merchandise trade deficit rose by 4.1% y/y as both exports and imports increased at a similar pace over the two 12-month periods while the expansion in the deficit can be mostly explained by a substantial fall of the secondary surplus to EUR19.3m over the 12-m period ending May 2019 compared to EUR135m a year ago. Trade in services has also contributed slightly to the decline in CA surplus as the former saw its surplus fall by 1.9% y/y during the period.
On the financing side, the capital account continues to expand strongly, up by 102% y/y to EUR448m as of end-May on the back of accelerating EU funds absorption. The financial account, on the other hand, recorded a net outflow of EUR785m, underpinned by portfolio investments as Estonians have been looking for higher yield abroad, while the other investment category also contributed. On the other hand, net FDI came at EUR700m as of end-May, down by 38% y/y compared to the previous 12-m period as overall investment sentiment has declined following the economic slowdown in the region.