Current Account Surplus To Moderate

Estonian balance of payments dynamics are expected to normalise somewhat beginning in 2010. After posting its first deficit in over a decade in 2009, the financial account is expected to flip back into positive territory this year, alongside a reduction in the current account surplus to 3.2% of GDP. We stress though, that a quick reversal back to the trends seen pre-recession are unlikely. Weak credit conditions in the eurozone and ongoing deleveraging in Estonia are likely to weigh on foreign investment, while concurrently ensuring that import demand growth is limited. Indeed, we believe that the shift to a current account surplus is representative of a structural change, with deficits not expected through our forecast period.

To read the full article, please choose one of the following options: