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20/02/2012 - Balance of payments: December 2011

Current account balance

In December 2011 the current account balance showed a deficit of €2.2 billion, up by €354 million or 19.4% year-on-year.

The trade deficit grew by €499 million, as a result of a substantial increase by €660 million in the net oil import bill, compared with the exceptionally low level of December 2010. The trade deficit excluding oil and ships shrank by €169 million, mainly owing to the decline in the import bill by €201 million or 8.8%, while the corresponding export receipts decreased (year-on-year), for the first time since mid-2010, by €33 million or 3.0%. Finally, net payments for purchases of ships remained roughly at December 2010 levels.

The surplus of the services balance grew by €137 million mainly as a result of higher net transport receipts and developments in the “other” services balance, which showed a small surplus (compared with deficits in the month of December in past years). Finally, the travel services balance showed a deficit larger by €33 million year-on-year. In more detail, travel spending in Greece by non-residents fell by 4.9%, while travel spending abroad by residents fell by 15.8%. Gross transport receipts (chiefly from merchant shipping) remained virtually unchanged (-1.8%), but the corresponding payments dropped markedly (by 14.3%); as a result, net receipts grew by 13.1%.

The income account deficit increased by €206 million, owing to the decline in net payments for interest, dividends and profits.

Finally, the current transfers surplus grew by €214 million year-on-year, reflecting the rise by €133 million in general government net transfer receipts (chiefly from the EU). Concurrently, the “other sectors” (mainly emigrants’ remittances) showed net transfer receipts of €30 million, against net payments of €52 million in December 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 2011, the current account deficit fell by €1.9 billion or 8.3% year-on-year, to €21.1 billion. This chiefly reflects a substantial decline of €3.6 billion in the non-oil trade deficit and a rise in the surplus of the services balance (by €1.4 billion) and in the current transfers surplus (by €0.4 billion), which more than offset a large increase in the net oil import bill and a widening of the income account deficit.

In more detail, the overall trade deficit shrank by €1.1 billion, as a result of a €3.2 billion (or 19.9%) decrease in the trade deficit excluding oil and ships and a €0.4 billion fall in net payments for purchases of ships. By contrast, the net oil import bill rose by €2.5 billion. It is particularly positive that receipts from exports of goods excluding oil and ships rose at a high rate (by 17.3%). However, the corresponding import bill registered a rather limited decline (only by 4.5%).

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 by non-residents in Greece grew markedly (by 9.5%) year-on-year, while travel spending by residents abroad rose by only 5.4%. According to data from the Bank of Greece’s border survey, in 2011 non-residents’ arrivals rose at an average annual rate of 9.5%. During the same year, gross transport receipts (chiefly from merchant shipping) fell by 8.6% and the corresponding payments dropped by 11.3%; as a result, net receipts shrank by €400 million.

The income account deficit rose by €923 million year-on-year, almost exclusively due to higher net payments for interest, dividends and profits (up by 10.3%).

Finally, the current transfers balance showed a surplus of €579 million, up by €380 million compared with 2010. This development is due to the fact that general government net transfer receipts (mainly from the EU) rose by €441 million, offsetting by far the €61 million rise in net transfer payments of sectors other than general government (chiefly emigrants’ remittances).

Capital transfers balance

In December 2011, the capital transfers balance showed a surplus of €0.8 billion, compared with a surplus of €1.2 billion in December 2010, reflecting a drop in net EU capital transfers to general government. (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 2011, the capital transfers balance showed a surplus of €2.7 billion, compared with €2.1 billion in 2010. This almost exclusively reflects a rise in net EU capital transfers to general government. The overall transfers balance (current transfers plus capital transfers) recorded a surplus of €3.25 billion, up by €1.0 billion year-on-year, reflecting the above-mentioned positive development in EU capital transfers.

Combined current account and capital transfers balance

In December 2011, the combined current account and capital transfers balance (corresponding to the economy’s external financing requirements) showed a deficit of €1.4 billion, compared with a deficit of €0.6 billion in December 2011. In 2011, this balance showed a deficit of €18.4 billion, compared with €20.9 billion in 2010 (down by 12%), i.e. it decreased at a faster pace than the current account deficit.

Financial account balance

In December 2011, non-residents’ direct investment in Greece showed a net inflow (increase) of €1.9 billion, compared with a net outflow of €10 million in December 2010. This is attributable to: (i) a €1.0 billion inflow for the increase of the stake of Crédit Agricole S.A. in the share capital of Emporiki Bank, (ii) a €575 million inflow for the participation of Société Générale (France) in the share capital increase of Geniki Bank, (iii) a €105 million inflow for the participation of Banco Commercial Portuguès (Portugal) in the share capital increase of Millennium Bank, (iv) a €45 million inflow for the increase of the stake of Johnson & Johnson (USA) in the share capital of Johnson & Johnson Hellas AEVE, (v) a €36 million or the increase of the stake of Johnson & Johnson (USA) in the share capital of Janssen-Cilag Farmakeftiki AEVE, and (vi) a €55 million inflow for the participation of Citibank Overseas Investment Corporation (USA) in the share capital increase of its subsidiary Diners Club of Greece Finance Company SA. Residents’ direct investment abroad recorded a net inflow of €15 million (decrease), without any remarkable transaction.

In the same month, a net outflow of €143 million was recorded under portfolio investment (against a net inflow of €3.2 billion in December 2010). This outflow came is due to the €1.6 billion decrease in non-residents’ investment in Greek bonds. This movement was offset by an equal decline in residents’ investment in foreign bonds and Treasury bills.

Under “other” investment, a net outflow of €990 million was recorded (against a net outflow of €3.0 billion in December 2010), which mainly reflects an €11.1 billion decrease (outflow) in non-residents’ deposit and repo holdings in Greece (outflow). This was offset by a net €8.2 billion increase (inflow) in the outstanding debt of the public and the private sector to non-residents, of which €7.8 billion concern net general government borrowing under the support mechanism for the Greek economy, while the corresponding gross general government borrowing came to €8.0 billion. A €1.9 billion net decrease in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad was also recorded (inflow).

In 2011 direct investment showed a net inflow of €25 million, compared with a net outflow of €457 million in 2010. More specifically, non-residents’ funds for direct investment in Greece registered a net inflow of €1.3 billion (against 0.3 billion in 2010) and mainly concerned the increase in the participation of foreign investors in the share capital of Emporiki Bank and Geniki Bank, while a net outflow of €1.3 billion was recorded under residents’ direct investment abroad (compared with a net outflow of €0.7 billion in 2010).

Also, in 2011 a net outflow of €17.3 billion was observed under portfolio investment (compared with a net outflow of €20.9 billion in 2010). This development reflects an outflow of funds due mainly to a decrease of €23.2 billion in non-residents’ holdings of Greek government bonds and Treasury bills and, secondarily, to a €707 million increase in residents’ investment in foreign derivatives and a €246 million decline in non-residents’ holdings of shares of Greek firms. These developments were only partly offset by a €6.8 billion decline in resident institutional investors’ holdings of foreign bonds and Treasury bills and a €71 million decrease in residents’ holdings of shares of foreign firms.

Under “other” investment, a net inflow of €35.2 billion (compared with a net inflow of €42.5 billion in 2010) is mainly attributable to a €39.1 billion increase in the outstanding debt of the public and the private sector to non-residents. In particular, net general government borrowing came to €39.4 billion and gross general government borrowing under the support mechanism for the Greek economy came to €41.5 billion. There was also a €5.5 billion decrease (inflow) in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad. By contrast, there was an €8.8 billion decrease (outflow) in non-residents’ deposits and repo holdings in Greece.

At end-December 2011, Greece’s reserve assets came to €5.4 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. Conversely, reserve assets do not include claims in euro on residents of non-euro area countries, claims in foreign currency and in euro on residents of euro area countries, and the Bank of Greece participation in the capital and the reserve assets of the ECB.)

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

Related link: Balance of payments December 2011 - table