OREANDA-NEWS. September 13, 2012. The current account of Estonia’s balance of payments has traditionally been  in a better balance in the second quarter than in the first months of the year, due to seasonal factors. This was not the case this year. Trade deficit widened compared to the start of the year, making up more than 5% of the quarterly GDP. Usually, a deterioration in the trade balance refers to a pickup in domestic demand. In the second quarter, the contribution of domestic demand to economic growth increased indeed, reported the press-centre of Eesti Pank.

Different from goods exports, services exports growth has not slowed much. In the second quarter, services exports exceeded imports by 10% of the quarterly GDP. All in all, the goods and services account remained in surplus, but it was smaller than last year. The current account as a whole posted a small deficit of 2% of the same quarter’s GDP. Just like in the first months of the year, the current account deficit was caused by the imputed outflow of foreign-owned companies’ reinvested profits.

Looking at cash flows, debt-generating flows were dominating besides increased funds from the EU budget. The balance of debt liabilities grew by slightly more than 2% during the quarter and the ratio of debt to GDP was about 98% at the end of June. Non-financial corporations borrowed the most. Since investment abroad exceeded the growth in debt liabilities, net external debt declined to 3% of GDP.