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20/12/2011 - Balance of payments - October 2011

Current account balance

In October 2011 the current account balance showed a deficit of €1,503 million, down by €749 million or 33.2% year-on-year.

The trade deficit fell by €113 million owing to a decline in the non-oil trade deficit. More specifically, receipts from exports of goods excluding oil and ships rose by €212 million or 21.8%, while the corresponding import bill declined by only 1.5% or €32 million. Also, net payments for purchases of ships dropped by €39 million, while the net oil import bill rose by €170 million.

The surplus of the services balance grew by €361 million mainly as a result of higher net travel receipts and, secondarily, net transport receipts, while the “other” services balance showed a small surplus (compared with a deficit in October 2010). In more detail, travel spending in Greece by non-residents grew by 15.0% in October, while travel spending abroad by residents fell by 7.1%. Gross transport receipts (chiefly from merchant shipping) fell by 7.9%, but the corresponding payments also dropped, by 18.3%; as a result, net receipts grew slightly by 2.9%.

The income account deficit narrowed by €16.6 million, owing to the decline in net payments for interest, dividends and profits.

Finally, the current transfers balance showed a deficit which was lower by €258 million compared with October 2010, reflecting the decrease by €268 million in general government net transfer payments chiefly to the EU. (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-October 2011 period, the current account deficit decreased by €2.2 billion or 11.5% year-on-year, to €16.5 billion. This chiefly reflects the substantial decline of €2.9 billion in the non-oil trade deficit and the rise in the surplus of the services balance (by €1.2 billion) and in the current transfers surplus (by €0.3 billion), which more than offset the large increase in the net oil import bill and the widening of the income account deficit.

In more detail, the overall trade deficit shrank by €1.4 billion, as a result of a €2.7 billion (or 20.1%) decrease in the trade deficit excluding oil and ships and a €0.2 billion fall in net payments for purchases of ships. By contrast, the net oil import bill rose by €1.5 billion. A particularly positive development was that receipts from exports of goods excluding oil and ships rose at a high rate (by 19.1%). However, the corresponding import bill registered a rather limited decline (by only 4.3%).

The 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. More specifically, travel spending in Greece by non-residents grew markedly (by 10.0%) year-on-year, while travel spending abroad by residents rose by only 3.7%. According to data from the Bank of Greece’s border survey, in the January-October 2011 period non-residents’ arrivals rose at an average annual rate of 10.2%. During the same period, gross transport receipts (chiefly from merchant shipping) fell by 10.1% and the corresponding payments decreased by 10.8%; as a result, net receipts shrank by €570 million.

The income account deficit rose by €655 million year-on-year, almost exclusively due to higher net payments for interest, dividends and profits (up by 8.6%).

Finally, the current transfers balance showed a surplus of €517 million, i.e. it almost doubled year-on-year (January-October 2010: €263 million). This development is due to the fact that general government net transfer receipts (mainly from the EU) rose by €379 million and offset a €124 million increase in the net transfer payments of other sectors apart from general government (chiefly emigrants’ remittances).

Capital transfers balance

In October 2011, the capital transfers balance showed a deficit of €8.7 million, compared with a deficit of €18.3 million in October 2010. (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-October 2011 period, the capital transfers balance showed a surplus of €1.1 billion, compared with €0.75 billion in the corresponding period of 2010. This mostly reflects a rise in net capital transfers from the EU to general government. The overall transfers balance (current transfers plus capital transfers) recorded a surplus of €1.7 billion, up by €647 million year-on-year, reflecting the above-mentioned positive development in capital transfers from the EU.

Combined current account and capital transfers balance

In October 2011, the combined current account and capital transfers balance (corresponding to the economy’s external financing requirements) showed a deficit of €1.5 billion, compared with a deficit of €2.3 billion in October 2010. In the January-October 2011 period, this balance showed a deficit of €15.4 billion, compared with €17.9 billion in the corresponding period of 2010, thus falling by 14.2%, i.e. at a faster pace than the current account deficit.

Financial account balance

In October 2011, non-residents’ direct investment in Greece showed a net outflow of €116 million (disinvestment), without any remarkable transactions. Residents’ direct investment abroad recorded a net outflow of €27 million, without any remarkable transactions either.

Under portfolio investment, a net outflow of €1.2 billion was recorded, reflecting a decrease in non-residents’ holdings of bonds issued by residents of Greece (outflow).

Under “other” investment, a net inflow of €2.3 billion was recorded, which mainly reflects a €2.1 billion net decline in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (inflow). There was also a €425 million net increase in non-residents’ deposit and repo holdings in Greece. By contrast, a net decline of €149 million was recorded in the outstanding debt of the public and the private sectors to non-residents.

In the January-October 2011 period, direct investment showed a net outflow of €1.75 billion (compared with a net outflow of €0.5 billion in the corresponding period of 2010). Specifically, net outflows of residents’ funds for direct investment abroad reached €1.27 billion, while non-residents’ investment in Greece showed a net outflow (disinvestment) of €0.48 billion.

A net outflow of €15.9 billion was observed under portfolio investment (compared with a net outflow of €20.6 billion in the corresponding period of 2010). In more detail, an outflow was recorded due to, mainly, a decrease of €21.1 billion in non-residents’ holdings of Greek government bonds and Treasury bills and, secondarily, a €606 million increase in residents’ investment in foreign derivatives and a €187 million decline in non-residents’ holdings of shares of Greek firms. These developments were only partly offset by a €6.0 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 €34.0 billion (compared with a net inflow of €39.8 billion in the corresponding period of 2010) is mainly attributable to a €29.8 billion increase in the outstanding debt of the public and the private sectors to non-residents. In particular, net general government borrowing came to €31.6 billion and gross general government borrowing under the support mechanism for the Greek economy came to €33.4 billion. There was also a €4.4 billion increase in non-residents’ deposit and repo holdings in Greece.

At end-October 2011, Greece’s reserve assets stood at €5.3 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.)

Related link: Balance of payments - October 2011 - Table 

Note: Balance of payments data for November 2011 will be released on 20 January 2012.