Estonia's current account deficit, which surged in recent years due to a consumer-led boom in imports, fell in 2008 to its lowest for seven years as demand for foreign goods slumped, data showed yesterday.
After a credit-fuelled boom, the small country has hit recession, which is driving down demand for imports and caused the current account deficit to shrink to 9.2% of gross domestic product (GDP) last year.
'The sudden deepening of the global economic crisis and a rapid easing in domestic demand had a considerable impact on the current account deficit of the balance of payments for 2008,' the central bank said in a statement.
In the fourth quarter of 2008, the gap was 5.5% of GDP, the lowest since 4.7% in the third quarter of 2004. The deficit hit a high of 23.9% in the first quarter of 2007 and was 18.1% for the whole of 2007.
The 2008 figure was the lowest full-year number since 2001's.
- Easy credit from Nordic banks fuelled the credit boom, leading to high levels of consumer spending.
- The credit flows started to ease in 2007 and then fell dramatically, in line with the global credit crunch.
- The current account deficit has been falling from the middle of 2007 as Estonia economic growth slowed, led by falling domestic demand,' the central bank added.
The bank expects the 2009 current account gap to be 6.5% of GDP.