Andres Saarniit, Economist at Eesti Pank
The global economic circumstances and the uncertain prospects for growth have meant that Estonia's exports have been more unstable than usual this year. The annual growth in exports of 9% at current prices that was seen in the first months of the year gave way to a fall of around 3% in the second quarter, which then accelerated to a rise of close to 8% in the third quarter. Under such circumstances it was somewhat surprising to see a sharp slowdown in the growth rates of some services, such as freight transport, travel services and construction.
In the third quarter of this year the ratio of capital investment to GDP reached 28%, its highest level since the crisis. The increased investment activity meant that imports of both goods and services were higher than in previous years, as a result of which, the third-quarter trade surplus in goods and services was about half of that of a year ago both in absolute terms and as a ratio to GDP. The surplus still reached 4.6% of GDP for the quarter, which is significantly higher than the average for the euro area for the last half year, as a consequence of the continued high levels of savings.
The current account surplus was pulled down by an outflow of investment income. As in previous quarters this was mainly a case of outflows of income for accounting purposes, or profits being reinvested in Estonia, as actual dividends made up only 8% of the outflow of income. In total the current account surplus fell to 0.9% of GDP in the third quarter.
As the surplus in the current account meant that there was no need for external financing, the net external debt continued to fall. In the third quarter of this year Estonia's external assets were larger than external liabilities for the first time.
Both exports and investment-driven imports increased in the third quarter