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20/08/2012 - Balance of payments: June 2012

Current account balance

In June 2012, the current account balance showed a deficit of €274 million, down by €1.3 billion or 82.8% year-on-year.

The trade deficit narrowed by €356 million, as a result of a €375 million decrease in the trade deficit excluding oil and ships, as well as a €200 million decline in the net import bill for ships. By contrast, the net oil import bill increased by €219 million or 40.7%, partly offsetting this improvement. The trade deficit excluding oil and ships shrank due to the considerable reduction of the import bill by €368 million or 16.2%, whereas export receipts rose by a mere 0.7%.

The services surplus contracted by €69 million owing to lower net travel receipts. Over the same period there was only a small increase in net transport receipts and a small decline in net payments for “other” services. In more detail, compared with June 2011, travel spending in Greece by non-residents declined by 7.1%, while travel spending abroad by residents of Greece increased by 10.8%; as a result, net receipts fell by €116 million. In the same month, non-residents’ arrivals dropped by 6.4%, according to data from the Bank of Greece’s border survey. Gross transport receipts (chiefly from merchant shipping) fell by 7.4% and the corresponding payments decreased by 17.2%, resulting in net receipts rising by €18 million.

The income account deficit fell by €990 million, on account of a €996 million decline in net payments for interest, dividends and profits, which, in turn, mainly reflects a €489 million decline in net interest payments on Greek government paper held by non-residents following the PSI. At the same time, net interest payments on deposits and loans also fell, by €476 million year-on-year, as a result of deferred interest payments on loans provided under the support mechanism through the ECB, owing to an interest rate adjustment.

Finally, the current transfers balance showed a much smaller deficit year-on-year, mainly on account of lower 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 first half of 2012, the current account deficit contracted by €5.9 billion or 45.2% year-on-year, to €7.1 billion. This development mainly reflects a significant decline of €3.2 billion in the non-oil trade deficit and a €2.1 billion decline in the income account deficit, as well as a increase in the surpluses of the services balance (by €433 million) and of the current transfers balance (by €208 million).

In more detail, the trade deficit decreased by €3.1 billion, as a result of a €2 billion (or 29.5%) decline in the trade deficit excluding oil and ships and a €1.2 billion drop in net payments for purchases of ships, whereas the net oil import bill recorded a very small increase (by €71 million or 1.3%). Receipts from exports of goods excluding oil and ships rose by 6.3%, while the corresponding import bill fell at an almost double rate (12.3%).The increase in the surplus of the services balance in the first half of 2012 is primarily due to higher net transport receipts and, secondarily, lower net payments for “other” services, while net travel receipts declined. In more detail, travel spending in Greece by non-residents fell markedly (by 10.0%) year-on-year, reflecting also a drop in non-residents’ arrivals at an average year-on-year rate of 9.0% (according to data from the Bank of Greece’s border survey). At the same time though, travel spending abroad by residents of Greece fell by 16.4%, thus limiting the decline in net receipts to €135 million. Over the same period, gross transport receipts (chiefly from merchant shipping) remained almost unchanged (-0.6%), but the corresponding payments dropped by 13.3%; as a result, net receipts rose by €458 million.

The income account deficit fell by €2.1 billion year-on-year, mainly owing to a sharp decline in net interest payments on Greek government paper held by non-residents following the PSI, and deferred interest payments on loans provided under the support mechanism through the ECB owing to an interest rate adjustment, as already mentioned.

Finally, the current transfers balance showed a surplus of €1.2 billion, up by €208 million year-on-year. This development is due to a €117 million decline in the net transfer payments of sectors other than general government (mainly emigrants’ remittances), as well as to a €91 million increase in general government net transfer receipts (mainly from the EU).

Capital transfers balance

In June 2012, the capital transfers balance showed a small deficit of €14 million, compared with €10.5 million in June 2011, reflecting the 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 the first half of 2012, the capital transfers balance showed a surplus of €1.1 billion, compared with €310 million in the corresponding period of 2011. This results exclusively from a rise in net EU capital transfers to general government.

The overall transfers balance (current transfers plus capital transfers) recorded a surplus of €2.3 billion in the first half of 2012, up by €965 million from the corresponding period of 2011, 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 €288 million in June 2012, compared with €1.6 billion in June 2011. In the first half of 2012, this balance showed a deficit of €6.0 billion, compared with €12.7 billion in the corresponding period of 2011, falling by 52.3%, i.e. at a faster pace than the current account deficit.

Financial account balance

In June 2012, non-residents’ direct investment in Greece showed a net inflow of €401 million. The most important transactions concerned: (a) a capital injection of €213 million by RBS NV (Netherlands) into its subsidiary RBS NV, (b) a €164 million inflow for participation in the share capital increase of PFIZER HELLAS SA from its parent company in Luxembourg, and (c) a €150 million inflow for participation of Delhaize Le Lion SA (Belgium) in the share capital increase of VASSILOPOULOS SA. Residents’ direct investment abroad recorded a net outflow (increase) of €55 million. The most important transaction concerned an €70 million outflow for the participation of Jumbo SA in the share capital increase of its subsidiary Jumbo ECB (Bulgaria).

Under portfolio investment, a net inflow of €307 million was recorded, reflecting a €1.7 billion inflow on account of a decline in residents’ holdings of foreign bonds and Treasury bills, as well as a €1.4 billion outflow as a result of a €1 billion decrease in non-residents’ holdings of Greek bonds and Treasury bills, a €283 million rise in residents’ holdings of shares of foreign firms, and a €49 million decline in non-residents’ holdings of shares of Greek firms.

Under “other” investment, a net outflow of €343 million was recorded, which reflects an inflow of €2.5 billion due to a net increase in the outstanding debt of the public and the private sector to non-residents (of which €1.0 billion concerns general government borrowing under the support mechanism for the Greek economy), as well as an outflow of €2.8 billion owing, on the one hand, to a net €2.4 billion decline in non-residents’ deposit and repo holdings in Greece and, on the other hand, to a €423 million increase in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad.

In the first half of 2012, direct investment showed a net inflow of €287.4 million (compared with a net outflow of €1.2 billion in the corresponding period of 2011). Specifically, non-residents’ direct investment in Greece showed a net inflow of €59 million, while residents’ direct investment abroad showed a net inflow of €229 million (disinvestment).

Under portfolio investment, there was a net outflow of €72.0 billion (compared with a net outflow of €9.7 billion in the corresponding period of 2011). In more detail, a capital outflow was recorded due, on the one hand, to a €39.2 billion increase in residents' holdings of foreign bonds and Treasury bills (including EFSF bonds) and, on the other hand, to a €31.8 billion decrease in non-residents’ holdings of Greek bonds and Treasury bills. Furthermore, a capital outflow was also recorded on account of an increase in residents’ holdings of foreign financial derivatives by €657 million.

Under “other” investment, a net inflow of €78.7 billion was recorded (compared with a net inflow of €23.5 billion in the corresponding half of 2011). This is chiefly attributable to a €76.4 billion increase in the net outstanding debt of the public and the private sector to non-residents (inflow) and to a €11.2 billion decline in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (inflow). In more detail, net general government borrowing came to €75.3 billion and reflects gross public sector borrowing from the EFSF and the IMF totalling €75.6 billion. This development was partly offset by an €8.65 billion decline in non-residents’ holdings of deposits and repos in Greece (outflow).

At end-June 2012, Greece’s reserve assets stood at €5.5 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 July 2012 will be released on 18 September 2012.

Related link: Balance of payments: June 2012 - Table