TALLINN - Estonia's current account deficit in November fell 40 percent year-on-year and approximately one-third compared with October, pointing to the economy's long-term sustainability.
According to the Bank of Estonia, the deficit amounted to 2.1 billion kroons (134 million euros) for November. The deficit had been greatest in the first quarter of 2007, and in March was 4.7 billion kroons. In October and September the gap was a little more than 3 billion.
The central bank said in its comments that the overall figure was influenced the most by the goods account 's the account with the largest turnover 's where the deficit halved to 1.8 billion kroons, the smallest figure for the last 12 months.
Compared with November a year ago, the export of goods grew 16 percent while imports declined 2 percent, the bank said.
The current account deficit is crucial in that it indicates the level of macroeconomic stability, or instability, in a national economy. Over recent years the Baltic states have had the largest such deficits in the EU27, with Latvia having the biggest.
Estonian analysts said that the steep reduction in the deficit was in line with expectations and that the gap would remain narrow.
Maris Lauri, an analyst with Hansabank Markets, predicted that a relatively low deficit was in store for December as well, even though an increase apparently took place in imports in the final month of the year as a result of the stockpiling of motor fuel ahead of a planned hike in the fuel excise duty.
"Otherwise, the inflow of EU monies in December was somewhat slower than in November," Lauri said.
The analyst said that the low level of imports corresponded with estimates as investments into the Baltic state were declining, and the rate of increase in consumption was rather modest.
"There is no major change expected in the first half of this year. Export growth may slow down somewhat because developments in the world economy have become more disadvantageous. Very much depends on how well Estonian manufacturers are able to replace their present products, so that there would be something to sell abroad," she added.
Andi Binsol, an analyst at Nordea Pank, also observed that the reduction in the current account deficit had been expected.
"For this year we predict a further decrease of the current account deficit, one of the reasons for which is the decline in domestic demand, primarily as a result of investment drying up," Binsol told the Baltic News Service.
Provided that economic growth is sustainable, it can be presumed that the current account deficit measured as a ratio to GDP will remain lower than the present level, the analyst said.
The Bank of Estonia said that import of services grew more than 10 percent while export remained at the earlier level. Growth in exports was held back by a reduction in the number of tourists visiting Estonia and lower sales of transport services, the bank said.