Methodology for the compilation of balance of payments flash estimate

A flash estimate of the balance of payments uses the same methodology as the quarterly balance of payments, and the methodology applicable from 2014 is provided in the IMF’s Balance of Payments and International Investment Position Manual, 6th Edition (BPM6). For detailed concepts and explanations of external sector statistics see External sector statistics definitions and explanations.

Since 1999 reference data Eesti Pank has published the main items of the balance of payments on a monthly basis. The release dates of external sector statistics are available in Statistics release calender.

Whereas the quarterly balance of payments is compiled using a representative combined system of sources including company surveys, the monthly balance of payments relies on a much narrower information base. Even though maximum use is made of the available information on the reporting month such as reports of international payments and administrative sources of information, estimations play a considerable role, hence the name 'flash estimate'. Estimates derived from statistical models make use of many indirect economic indicators or the annual changes in them. After the quarterly balance of payments is complied, the monthly balance of payments is adjusted so that the sum of the entries of three monthly balances of payments is equal to the total sum of the entries for the quarterly balance of payments.

The following sources of information are used for the main entries of the flash estimate of a balance of payments:

• foreign trade data from Statistics Estonia;
• reports from credit institutions;
• the accounting registers of Eesti Pank;
• a report by the Ministry of Finance on the use and servicing of state loans and the use of money received from the structural funds of the European Union, and reports on contributions paid to the European Union budget;
• information from local governments on changes in loan liabilities;
• data from the Centralised Securities Database of the European System of Central Banks (ESCB) on the securities claims of Estonian investors;
• data from the Estonian Central Register of Securities on residents’ liabilities to foreign investors;
• estimates of the mobility of tourists based on mobile positioning and data from sample surveys on the average expenditure by tourists;
• data collected in the international transaction reporting system (ITRS) of credit institutions;
• the media, principally news agencies and the press.

Current account

The goods account is compiled using data from Statistics Estonia on foreign trade in the month under observation. Various additions are made to foreign trade statistics under the methodology for compiling the goods account of the balance of payments. First, the goods account only covers the export and import of goods for free circulation, while the export and import of goods for processing is used to estimate manufacturing services on the services account. Second, the price of goods is recalculated. In official foreign trade statistics the import of goods is recorded in CIF prices (cost, insurance, freight – an international trade term that indicates the cost of goods and the costs related to the transport and insurance of goods up to the customs border of the purchaser’s country). As the balance of payments reflects the import of goods in FOB prices (free on board – an international trade term that indicates the cost of goods and costs related to the transport and insurance of goods up to the customs border of the seller’s country), imports are adjusted accordingly. The transport and insurance costs of goods up to the customs border of the importing country are taken into account when the services account is compiled.

In addition to foreign trade data, the goods account includes other relatively small-scale entries, such as the purchase or sale of goods under merchanting and goods purchased for means of transport while abroad. These components are estimated using the data for previous periods.

The services account is mainly based on statistical models for the estimation of the more important categories of services (credit or sale and debit or purchase are estimated separately):

• manufacturing services;
• transport;
• travel;
• construction;
• other services.

The monthly estimate for manufacturing services is mainly based on data from Statistics Estonia on the import and export of goods for processing (goods for processing in Estonia and abroad), from which the export and import of manufacturing services are estimated. The statistical models used to estimate the export and import of transport services are based on annual changes in the volumes of transit and import goods respectively. The credit and debit of travel services is estimated from the number of tourists, which is determined using mobile positioning, and their expenditure in the country of visit. Information on expenditure is obtained using passenger surveys. Construction and other services are estimated from data in the international transaction reporting system (ITRS) and estimates from econometric models.

The primary income account credit (inflow) and debit (outflow) estimates are based on a quarterly model that considers the foreign investment position from a year ago and the average annual yield of the given type of investment. Separate estimates are made for income from the assets and liabilities of direct investment, portfolio investment and other investment. The primary income account also reflects income from the investment of central bank reserves, agricultural subsidies received from the European Union structural funds, and customs duties transferred to the European Union.

The secondary income account is compiled using general government data on the use of European Union structural funds (some of them recorded under capital transfers) and information on the contribution of Estonia to the European Union budget, together with estimates based on information about cross-border payments.

The capital account is compiled using information on the use of European Union structural funds for infrastructure development and data from the international transaction reporting system.

Financial account

Direct investmentis estimated using statistical models; changes in direct investment assets and liabilities are estimated separately. Relatively detailed information from credit institutions is available on the change in direct investment assets and liabilities. Data from the Estonian Central Register of Securities and the media on major direct investment are used for the other sector, as is information on cross-border payments. The resulting aggregates are divided in greater detail into changes in equity capital, reinvested earnings and debt investments.

Portfolio investment is estimated separately as investments in equity and debt securities. Assets are calculated from the Centralised Securities Database of the ESCB. The preliminary data on liabilities is received from the Estonian Central Register of Securities and the monthly reports of credit institutions.

Financial derivatives are calculated from the reports of monetary financial institutions (the central bank and credit institutions) and investment funds.

Other investment is calculated from the monthly reports of monetary financial institutions and the general government and estimates obtained from statistical models.