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19/11/2012 - Balance of payments: September 2012

Current account balance

In September 2012, the current account balance showed a surplus of €775 million, compared with a deficit of €1.1 billion in September 2011.

The trade deficit fell by €700 million, as a result of a €512 million decrease in the trade deficit excluding oil and ships, as well as declines of €68 million and €120 million in the net import bill for oil and ships, respectively. The trade deficit excluding oil and ships shrank due to the considerably reduced import bill (down by €726 million or 30.3%), despite the fact that export receipts fell by €213 million or 15.9% in September 2012.

The surplus of the services balance narrowed by €75 million as a result of a decrease in net receipts from “other” services and transport services, while net travel receipts remained almost unchanged. In more detail, compared with September 2011, travel spending in Greece by non-residents grew by 0.6%, while travel spending abroad by residents rose by 5.1%; as a result, net receipts showed a small increase of €2.0 million. In the same month, non-residents’ arrivals decreased by 2.5%, according to data from the Bank of Greece’s border survey. Gross transport receipts (chiefly from merchant shipping) fell by 16.5%, but the corresponding payments also fell (by 24.1%); as a result, net receipts decreased by €63 million.

The income account showed a surplus of €144 million, compared with a deficit of €939 million in September 2011, because the interest, dividend and profit balance improved, as it showed net receipts of €160 million in September 2012, against net payments of 909 million in September 2011. This development, in turn, mainly reflects a decline in net interest payments on Greek government bonds held by non-residents, following the PSI.

Finally, the current transfers balance showed a deficit of €66 million, compared with a deficit of €203 million in September 2011, chiefly as a result of lower net general government transfer payments (mainly to the EU), as well as a shift in the other sectors balance (mainly emigrants’ remittances) from a deficit in September 2011 to net receipts. (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-September 2012 period, the current account deficit contracted by €11.3 billion or 76.5% year-on-year, to €3.5 billion. This development primarily reflects a significant decline of €5.3 billion in the trade deficit, a €4.4 billion decrease in the income account deficit, as well as increases of €933 million and €590 million in the surpluses of the current transfers balance and the services balance, respectively.

In more detail, the trade deficit decreased as a result of a €3.1 billion (or 31.8%) decline in the trade deficit excluding oil and ships and a €2.0 billion drop in net payments for purchases of ships, whereas the net oil import bill shrank by €257 million or 3.1%. Receipts from exports of goods excluding oil and ships rose by 1.8%, while the corresponding import bill fell at a much faster pace (15.0%).

The increase observed in the surplus of the services balance over the first nine months of 2012 is primarily due to higher net transport receipts and, secondarily, lower net payments for “other” services, as well as higher net travel receipts. In more detail, travel spending by non-residents in Greece fell by 2.7% year-on-year, while non-residents’ arrivals declined at an average annual rate of 5.2% (according to data from the Bank of Greece’s border survey). At the same time, travel spending abroad by residents fell by 17.6%; as a result, net receipts rose by €67 million. Over the same period, gross transport receipts (chiefly from merchant shipping) decreased by 3.4%, but the corresponding payments decreased even more (by 14.5%); as a result, net receipts rose by €445 million.

The income account deficit fell by €4.4 billion year-on-year, mainly owing to a drastic decline in net interest payments on Greek government bonds held by non-residents, following the PSI, and deferred interest payments on loans under the support mechanism through the ECB owing to interest rate changes, as already mentioned in the June 2012 press release.

Finally, the current transfers balance showed a surplus of €1.6 billion, up by €933 million year-on-year. This development is chiefly due to a €721 million rise in general government net transfer receipts (mainly from the EU) and a €213 million drop in the net transfer payments of the sectors other than general government (mainly emigrants’ remittances).

Capital transfers balance

In September 2012, the capital transfers balance showed a small deficit of €8.1 million, compared with a surplus of €7.9 million in September 2011, reflecting mainly a shift in the balance of the sectors other than general government to a deficit, from a surplus in September 2011, while net EU capital transfers to general government remained almost nil. (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-September 2012 period, the capital transfers balance showed a surplus of €1.6 billion, compared with €1.2 billion in the corresponding period of 2011. This increase stems 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 €3.2 billion in the reviewed period of 2012, up by €1.4 billion 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 surplus of €767 million in September 2012, compared with a deficit of €1.1 billion in September 2011. In the January-September 2012 period, this balance showed a deficit of only €1.9 billion, compared with €13.6 billion in the corresponding period of 2011 (down by 86.2%), i.e. it fell at a faster pace than the current account deficit.

Financial account balance

In September 2012, non-residents’ direct investment in Greece showed a net outflow (decline) of €25 million. The most important transactions concerned (a) an inflow of €30 million for the participation of the parent company Abbott Investment SPRL (Luxembourg) in the capital increase of Abbott Laboratories Hellas S.A.; and (b) an inflow of €25 million for the participation of the parent company Abbvie Investment SPRL (Luxembourg) in the capital increase of Abbvie Pharmaceuticals S.A.; however, these inflows were offset by outflows due to negative reinvested earnings (i.e. losses instead of profits on the balance sheets of corporate direct investors in Greece). Residents’ direct investment abroad recorded a net outflow (increase) of €15 million, without any remarkable transaction.

As regards portfolio investment, a net inflow of €41 million was recorded, reflecting mainly a €803 million decline in residents’ holdings of foreign bonds and Treasury bills, as well as €148 million fall in residents’ holdings of foreign shares. These developments were partly offset by a €903 million outflow due to a decrease in non-residents’ holdings of Greek bonds and Treasury bills.

Under “other” investment, a net outflow of €685 million was recorded, which is mainly attributable to a net decrease of €1.7 billion in non-residents’ deposit and repo holdings in Greece (outflow) and a small increase (of €33 million) in loans granted to non-residents. These developments were partly offset by a net €853 million decrease in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (inflow), as well as a very small rise of €7 million in the outstanding debt of the public and the private sector to non-residents (inflow).

In the January-September 2012 period, direct investment showed a net inflow of €2.0 billion (compared with a net outflow of €2.0 billion in the corresponding period of 2011). Specifically, non-residents’ direct investment in Greece showed a net inflow of €1.8 billion, while residents’ direct investment abroad showed a net inflow of €185 million (disinvestment).

A net outflow of €76.0 billion was observed under portfolio investment (compared with a net outflow of €16.9 billion in the corresponding period of 2011). In more detail, a capital outflow was recorded, on the one hand due to a €38.8 billion increase in residents’ holdings of foreign bond and Treasury bills (including EFSF bonds) and, on the other hand, a €36.2 billion decrease in non-residents’ holdings of Greek bonds and Treasury bills. Furthermore, a capital outflow was recorded also on account of increases of €719 million and €102 million in residents’ holdings of foreign financial derivatives and foreign shares, respectively. A €149 million outflow was also observed due to a decline in non-residents’ investment in shares of Greek firms.

Under “other” investment, a net inflow of €77.3 billion was recorded (compared with a net inflow of €33.8 billion over the first nine months of 2011). This is chiefly attributable to a €76.0 billion increase in the net outstanding debt of the public and the private sector to non-residents (inflow) and to a €13.7 billion decline in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (inflow). In more detail, net general government borrowing came to €75.1 billion and reflects gross public sector borrowing of €75.6 billion from the EFSF and the IMF. These developments were partly offset by a €11.9 billion decline in non-residents’ holdings of deposits and repos in Greece (outflow).

At end-September 2012, Greece’s reserve assets stood at €5.9 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 October 2012 will be released on 20 December 2012.

Related link: Balance of payments: September 2012 - Table