The current account surplus narrowed by 11.5% y/y to EUR114.4m in November, according to figures of the Bank of Estonia, published on Monday. The merchandise trade balance reported a surplus of EUR24.2m, which compares rather positively to a deficit of EUR14.5m in the same period last year. Meanwhile, however, the services trade surplus narrowed by 5.8% y/y to EUR138.4m, while the secondary income balance also turned to a deficit of EUR13.9m, likely due to lower remittance flows from abroad. On the financing side, the financial account reported a net outflow of EUR241.4m, higher by 60.7% y/y. The outflow was attributed to portfolio investment, as Estonians keep searching for higher yield abroad and also by other investment. Meanwhile, direct investment surged tangibly with an inflow of EUR369.8m.
In 12-month rolling terms, the current account surplus narrowed by 44.4% y/y to EUR374.6m, representing 1.5% of projected GDP for 2018, according to our estimations. The merchandise trade deficit widened by 35.7% y/y to EUR1.2bn, driven by strong domestic demand, while the services trade surplus expanded by 0.6% y/y to EUR1.9bn, due to strong demand for Estonians services abroad. The financial account reported an outflow of EUR675.9m, once again driven by portfolio and other investments. Meanwhile, FDI registered an inflow of EUR1.6bn in the 12-month period ending in November 2018, higher by 156.8% y/y.
To remind, the government expects the CA surplus at 2.1% of GDP in 2018, according its forecast, published in September. Meanwhile, the European Commission expects the surplus at 3.5% and the IMF at 2.2% of GDP.