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19/09/2011 - Balance of payments: July 2011

Current account balance

In July 2011, the current account deficit decreased by €568 million year-on-year, coming to €902 million.

The trade deficit fell by €134 million owing to an improvement in the trade balance excluding oil and ships. More specifically, receipts from exports of goods excluding oil and ships rose by 12.2%, while the corresponding import bill declined by 7.3%. By contrast, the net import bill for oil and ships increased.

The surplus of the services balance grew by €278 million as a result of, mainly, higher net travel receipts and, secondarily, lower net payments for “other” services, while net transport receipts declined. More specifically, travel spending in Greece by non-residents grew considerably in July (by 16.7%). Both gross transport receipts (chiefly from merchant shipping) and the corresponding payments showed a decline, of 16.2% and 13.7%, respectively; as a result, net receipts dropped by 18.6%.

The income account deficit fell by €118 million, mainly as a result of a €126 million decrease in net payments of interest, dividends and profits.

Finally, the current transfers balance showed a surplus of €43 million, compared with just €4 million in July 2010 (It should be recalled that gross current transfers from the EU mainly include receipts from the European Agricultural Guidance and Guarantee Fund (EAGGF), as well as receipts from the European Social Fund, while current transfers to the EU include Greece’s contributions (payments) to the Community Budget.)

In the January-July 2011 period, the current account deficit fell by €1.4 billion or 9.0% year-on-year, to €14.2 billion. This chiefly reflects a significant decline of €2.4 billion in the non-oil trade deficit, a rise of €483 million in the surplus of the services balance and a very small increase in the current transfers surplus, which more than offset a large rise in the net oil import bill and a widening of the income account deficit.

In more detail, the overall trade deficit shrank by €1.2 billion, as a result of a €2.2 billion decrease in the trade deficit excluding oil and ships and a €201 million fall in net payments for purchases of ships. By contrast, the net oil import bill rose by €1.2 billion. Most importantly, receipts from exports of goods excluding oil and ships rose by 15.6%, while the corresponding import bill declined by 7.3%.
A €483 million increase in the surplus of the services balance reflects higher net travel receipts and lower net payments for “other” services, which more than offset a contraction in net transport receipts. Gross transport receipts (chiefly from merchant shipping) fell by 11.8% and the corresponding payments dropped by 9.2%; as a result, net receipts shrank by €634 million. During the same period, travel spending in Greece by non-residents grew markedly (by 14.2% year-on-year), while travel spending abroad by residents rose by only 1.5%. According to data from the Bank of Greece’s border survey, in the January-July period non-residents’ arrivals rose by 11.4% year-on-year.

The income account deficit rose by €273 million year-on-year, mainly due to higher net payments of interest, dividends and profits (up by 4.3%).

Finally, the current transfers balance showed a surplus of €1,056 million, up by €12 million compared with the corresponding period of 2010. This development is due to the fact that general government net transfer receipts (mainly from the EU) rose by €132 million and more than offset net transfer payments of €118 million (compared with net receipts of €2 million in the corresponding period of 2010) recorded under sectors other than general government (chiefly emigrants’ remittances). As regards general government receipts, it has been noted (in previous press releases) that the bulk of the funds allocated to general government under EU current transfers for the whole of 2011, concerning direct aid and subsidies under the Common Agricultural Policy, was already absorbed during the first two months of 2011.

Capital transfers balance

In July 2011, the capital transfers balance showed a deficit of €254 million, down by €410 million year-on-year. (Capital transfers from the EU mainly include receipts from the Structural Funds – except for the European Social Fund – and the Cohesion Fund under the Community Support Framework.)

In the January-July 2011 period, the capital transfers balance showed a surplus of €564 million, compared with €801 million in the corresponding period of 2010. This mostly reflects a decrease in net EU capital transfers to general government. The overall transfers balance (current transfers plus capital transfers) recorded a surplus of €1,620 million, down by €224 million year-on-year, reflecting the above-mentioned out-turn of EU current transfers.

Combined current account and capital transfers balance

In July 2011, the deficit of the combined current account and capital transfers balance (corresponding to the economy’s external financing requirements) reached €648 million, compared with €806 million in July 2010. In the January-July 2011 period, this deficit came to €13.6 billion, compared with €14.8 billion in the corresponding period of 2010 (down by 7.9%).

Financial account balance

In July 2011, non-residents’ direct investment in Greece showed a net inflow of €457 million. The most important transaction concerned a €392 million inflow for the acquisition by Deutsche Telekom (Germany) of 10% of the share capital of OTE (Hellenic Telecommunications Organisation). Residents’ direct investment abroad recorded a net outflow of €407 million. The most important transaction under this category concerned a capital injection of €350 million by EFG Eurobank Ergasias SA to its subsidiary “EFG Eurobank Ergasias SA Spolka Akcyjna Oddzial w Polsce” (Poland).

Under portfolio investment, a net inflow of €305 million was recorded, reflecting a €358 million decrease in residents’ holdings of foreign bonds and Treasury bills, a €34 million decline in residents’ holdings of foreign financial derivatives, and a €142 million increase in non-residents’ holdings of Greek government bonds and Treasury bills (inflow). These developments were only partly offset by a €150 million rise in residents’ holdings of foreign shares and a €79 million drop in non-residents’ purchases of shares of Greek firms (outflow).

Under “other” investment, a net inflow of €967 million was recorded, which mainly reflects an €11.7 billion increase in the net outstanding debt of the public and the private sector to non-residents (in particular, gross general government borrowing under the support mechanism for the Greek economy came to €11.9 billion). This development was partly offset by a €3.2 billion rise in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (outflow) and a €7.5 billion net decrease in non-residents’ deposit and repo holdings in Greece (outflow).

In the January-July 2011 period, direct investment showed a net outflow of €656 million (compared with a net inflow of €679 million in the corresponding period of 2010). Specifically, net outflows of residents’ funds for direct investment abroad reached €1.3 billion, while net inflows of non-residents’ funds for direct investment in Greece came to €634 million.

A net outflow of €9.4 billion was observed under portfolio investment (against a net outflow of €6.2 billion in the corresponding period of 2010). In more detail, an outflow was recorded due to, mainly, a decrease of €14.7 billion in non-residents’ holdings of Greek government bonds and Treasury bills and, secondarily, a €623 million increase in residents’ investment in foreign derivatives and a €131 million decline in non-residents’ holdings of shares of Greek firms. These developments were only partly offset by a €5.9 billion decline in resident institutional investors’ holdings of foreign bonds and Treasury bills and a €76 million drop in residents’ holdings of shares of foreign firms.

Under “other” investment, a net inflow of €24.5 billion (compared with a net inflow of €21.1 billion in the corresponding period of 2010) is mainly attributable to a €31.6 billion increase in the net outstanding debt of the public and the private sector to non-residents. In particular, net general government borrowing came to €32.1 billion and the corresponding gross general government borrowing under the support mechanism for the Greek economy came to €33.4 billion. This development was partly offset by a €3.4 billion rise in residents’ deposit and repo holdings abroad and a decrease in non-residents’ deposit and repo holdings in Greece, also of €3.4 billion (outflow).

At end-July 2011, Greece’s reserve assets stood at €4.75 billion. (It should be recalled that, since Greece joined the euro area in January 2001, reserve assets, as defined by the European Central Bank, include only monetary gold, the "reserve position" with the IMF, "Special Drawing Rights", and Bank of Greece claims in foreign currency on residents of non-euro area countries. Excluded are euro-denominated claims on non-euro area residents, claims (in foreign currency and in euro) on euro area residents, and the Bank of Greece share in the capital and reserves of the ECB.)

Note: Balance of payments data for August 2011 will be released on 20 October 2011.

Related link: Balance of payments: July 2011 - Table