External Debt Mountain

August 2005
Emerging Europe Monitor: Central Europe & Baltic States;Aug2005, Vol. 12 Issue 8, p10
Country Report
Country Report
The article reports that Estonia's credit-fuelled current account deficits have contributed to rising external indebtedness. Estonia's external debt reached 94% of expected GDP in March 2005, according to the country's central bank. The rapid ascent of the external debt ratio from 50-55% annually in 1997-2001 is associated with the emergence of double-digit current account deficits, averaging 12% of GDP in 2002-04, and a relative reduction in long-term equity finance. Net foreign direct investment financed just under half of the cumulative current account deficit in 2002-04, leaving Estonians to borrow from abroad to plug the gap. The bulk of that borrowing was undertaken by the country's banks in order to fund the expansion of their domestic loan books, and the penetration of neighbouring markets.


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