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22/06/2012 - Balance of payments: April 2012

Current account balance

In April 2012, the current account balance showed a deficit of €912 million, down by €1,313 million or 59% year-on-year.

The trade deficit shrank by €807 million on account of a €366 million decline in the net oil import bill, a €277 million drop in the trade deficit excluding oil and ships, and a €165 million reduction in net payments for purchases of ships. The trade deficit excluding oil and ships contracted mainly due to the considerably reduced import bill (down by €280 million or 14.0%), whereas the rise in the corresponding export receipts remained virtually unchanged (-0.3%).

The surplus of the services balance increased by €164 million as a result of, mainly, higher net transport receipts and, secondarily, higher net travel receipts, as well as a decline in net payments for “other” services. In more detail, travel spending in Greece by non-residents decreased by 8.4% year-on-year, while travel spending abroad by residents of Greece fell by 35.7%; as a result, net receipts rose by 24.8%. In the same month, non-residents’ arrivals dropped by 6.5%, according to the Bank of Greece’s border survey. Gross transport receipts (chiefly from merchant shipping) showed a small decline (of 2.6%), but the corresponding payments decreased significantly (by 19.3%); as a result, net receipts grew by 17.9%.

The income account deficit narrowed by €442 million, chiefly on account of a €478 million decline, following the PSI, in net interest payments on Greek government securities held by non-residents.
Finally, the current transfers balance recorded a deficit that was much higher than the small deficit in April 2011, reflecting mainly a rise in the transfer payments of general government (mainly to the EU) and an almost equal decrease in the corresponding gross transfers from 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-April 2012 period, the current account deficit fell by €3.8 billion or 40.3% year-on-year, to €5.6 billion. This development reflects, primarily, a significant decline of €2.0 billion in the non-oil trade deficit and an increase of €662 million in the surplus of the services balance and, secondarily, both a decline (of €512 million) in the income account deficit and an increase (of €86 million) in the surplus of the current transfers balance. At the same time, the net oil import bill fell by €554 million. It should be noted that this decline is the combined result of the net payments recorded in January 2012 – which were considerably lower than in January 2011, when a deferred payment concerning imports of the year 2010 had been included – and probably a decline in the volume of oil imports in February and April 2012. In any event, in March 2012 the net oil import bill almost doubled.

In more detail, the overall trade deficit shrank by €2.5 billion, as a result of a €1.25 billion (or 28.9%) decline in the trade deficit excluding oil and ships and a €737 million drop in net payments for purchases of ships, whereas the net oil import bill declined considerably, as already mentioned. Receipts from exports of goods excluding oil and ships rose by 5.8%, while the corresponding import bill fell at a relatively faster pace (12.1%).

The increase in the surplus of the services balance is mainly due to higher net transport receipts and lower net payments for “other” services and – to a much lesser extent – higher net travel receipts. In more detail, travel spending in Greece by non-residents fell markedly (by 12.2%) year-on-year, reflecting also a drop in non-residents’ arrivals at an average year-on-year rate of 9.8% (according to data from the Bank of Greece’s border survey). At the same time, however, travel spending abroad by residents of Greece fell by 24.1%, resulting in a rise of €75 million in net receipts. Over the same period, gross transport receipts (chiefly from merchant shipping) remained unchanged, but the corresponding payments dropped by 13.7%; as a result, net receipts rose by €338 million.

The income account deficit fell by €512 million year-on-year, mainly owing to a sharp decline, following the PSI, in net interest payments on Greek government securities held by non-residents.

Finally, the current transfers balance showed a surplus of €1.3 billion, up by €86 million year-on-year. This development is mainly due to a decline of €129 million in the net transfer payments of the sectors other than general government (mainly emigrants’ remittances), which more than offset a decline of €43 million in the net current transfer receipts of general government (mainly from the EU).

Capital transfers balance

In April 2012, the capital transfers balance showed a small surplus of €26 million, compared with a deficit of €7 million in April 2011, reflecting a commensurate increase 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 the January-April 2012 period, the capital transfers balance showed a surplus of €1.1 billion, compared with €305 million in the corresponding period of 2011. This increase 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 €2.4 billion in the January-April 2012 period, up by €860 million year-on-year, reflecting the above-mentioned positive development in EU capital transfers.

Combined current account and capital transfers balance

The combined current account and capital transfers balance (corresponding to the economy’s external financing requirements) showed a deficit of €887 million in April 2012, compared with €2.2 billion in April 2011. In the January-April 2012 period, this balance showed a deficit of €4.6 billion, compared with €9.1 billion in the corresponding period of 2011 (down by 50.1%), i.e. it fell at a faster pace than the current account deficit.

Financial account balance

In April 2012, non-residents’ direct investment in Greece showed a net inflow (increase) of €27 million. The most important transactions concerned (a) a €114 million inflow for the participation in the capital increase of Siemens SA Ilectrotechnikon by the German principal shareholder; and (b) a €43 million inflow for the participation in the capital increase of Siemens Healthcare Diagnostics SA by the Dutch principal shareholder. Residents’ direct investment abroad recorded a net inflow (decrease) of €450 million. The most important transaction concerned a €460 million inflow due to the sale of Eurobank’s subsidiary in Poland “EFG Eurobank Ergasias SA Spolka Akcynja Oddzial w Polsce” to Austrian “Raiffeisen Bank International AG” (disinvestment).

Under portfolio investment, a net outflow of €27.8 billion was recorded, reflecting mainly a €25.4 billion rise in residents’ investment in foreign bonds and Treasury bills (outflow), as well as a €2.3 billion decrease in non-residents’ investment in Greek bonds and Treasury bills (outflow).

Under “other” investment, a net inflow of €27.6 billion was recorded, which is mainly attributable to a net increase of €31.6 billion in the outstanding debt of the public and the private sector to non-residents (inflow). This reflects public-sector borrowing from the EFSF (€25 billion for the recapitalisation of Greek banks, €3.3 billion for the bond swap and €3.3 billion cash loan). An inflow was also recorded due to a €1.4 billion decline in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad. These developments were offset by a €5.3 billion decrease in non-residents’ deposit and repo holdings in Greece (outflow).

In the January-April 2012 period, direct investment showed a net inflow of €77 million (compared with a net outflow of €703 million in the corresponding period of 2011). Specifically, non-residents’ direct investment in Greece showed a net outflow of €263 million, while residents’ direct investment abroad recorded a net inflow of €339 million (decline).

A net outflow of €64.8 billion was observed under portfolio investment (compared with a net outflow of €5.4 billion in the corresponding period of 2011). In more detail, a capital outflow was recorded due to, mainly, a €37.2 billion increase in resident institutional investors’ holdings of foreign bond and Treasury bills, as well as a decrease of €27.5 billion in non-residents’ holdings of Greek bonds and Treasury bills and, secondarily, a €528 million rise in residents’ investment in foreign financial derivatives. Residents’ holdings of shares of foreign firms decreased by €426 million (inflow).

Under “other” investment, a net inflow of €69.9 billion was recorded (compared with a net inflow of €15.0 billion in the corresponding period of 2011). This is chiefly attributable to a €69.2 billion increase in the net outstanding debt of the public and the private sector to non-residents (inflow) and to a €11.6 billion decline in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (inflow). In more detail, net general government borrowing came to €70.3 billion and reflects public-sector borrowing from the EFSF and the IMF. This development was partly offset by a €10.9 billion decline in non-residents’ holdings of deposits and repos in Greece (outflow).

At end-April 2012, Greece’s reserve assets stood at €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. 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 May 2012 will be released on 20 July 2012.

Related link: Balance of payments: April 2012- Table




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