The current account balance turned to a deficit of EUR12.9m in December, according to figures of the central bank, published on Wednesday. The merchandise trade deficit widened by 35.0% y/y to EUR147.6m, driven by strong domestic demand, while in addition the services surplus narrowed by 13.0% y/y to EUR147.8m. Furthermore, the secondary income surplus also narrowed, likely due to lower remittance flows from abroad. The financial account reported a net outflow of EUR147.6m, underpinned by portfolio and other investment. On the other hand, FDI registered an inflow of 63.7mn, although lower by 76.6% y/y.
In 12-month rolling terms, the current account posted a surplus of EUR304m in 2018, down by 57.1% y/y. The surplus represented approximately 1.2% of projected nominal GDP for the year. The merchandise trade deficit expanded by 39.8% y/y to EUR1.2bn, while the services surplus also narrowed slightly by 1.2% y/y to EUR1.9bn. The secondary income surplus was also cut in half to EUR73.2m. The financial account reported a net outflow of EUR 596.8mn, mainly driven by portfolio investment as Estonians kept searching for higher yield on their investments abroad. Meanwhile, FDI more than doubled to EUR1.3bn.
Looking ahead, Estonia’s current account surplus might narrow down somewhat in 2019, given expectations about moderating demand among Estonia’s key trading partners, while on the other hand, domestic demand is projected to remain strong.