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22/05/2013 - Balance of payments: March 2013

Current account balance

In March 2013, the current account balance showed a deficit of €1.3 billion, down by €952 million (or 42.5%) year-on-year. This development is mainly due to declines in the trade deficit and the income account deficit.

The trade deficit contracted by €365 million, mainly as a result of a €377 million decrease in the net oil import bill. Net payments for purchases of ships increased by €26 million and the trade deficit excluding oil and ships shrank by a mere €14.5 million on the back of a lower import bill (down by €91 million or 5.0%), while the corresponding export receipts fell in March (by €77 million or 6.6%).

The surplus of the services balance grew by €19 million as a result of lower net payments for “other” services (down by €161 million), which offset a drop in net transport receipts. This improvement is mainly attributed to financial services, in particular to the fact that a €165 million fee on future loans under the support mechanism, which was paid to the EFSF in March 2012, was not repeated in March 2013. The small surplus of the travel services balance registered a limited decline. Specifically, travel spending in Greece by non-residents fell by €22 million or 14%, while travel spending abroad by residents declined by €20 million or 14.1%; as a result, the travel balance showed a €14 million surplus in March 2013, compared with €16 million in March 2012. Net transport receipts fell by €140 million, mainly on account of lower net sea transport receipts.

The income account deficit shrank by €490 million, almost exclusively owing to a decline in net interest, dividend and profit payments.

Finally, the current transfers balance showed a surplus of €78.4 million, compared with an almost zero balance in March 2012, reflecting an increase mainly in general government net receipts (chiefly 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 first quarter of 2013, the current account deficit contracted by €2.5 billion or 51.2% year-on-year, to €2.3 billion. This development principally reflects significant declines (of €1.35 billion and €806 million) in both the trade deficit and the income account deficit, respectively, as well as a concurrent increase of €324 million in the current transfers surplus, while the services surplus fell by €16 million.

In more detail, the trade deficit shrank on account of a €449 million (or 18.9%) decrease in the trade deficit excluding oil and ships, lower net payments for purchases of ships by €57 million (or 15.9%) and a lower net oil import bill by €844 million (or 26.8%). Receipts from exports of goods excluding oil and ships rose by 4.1%, while the corresponding import bill fell by 5.6%.

A contraction in the services surplus in the first quarter of 2013 is mainly attributed to a drop in net transport receipts, which offset an improvement in the travel balance and lower net payments for other services. More specifically, in the first quarter of 2013, although non-residents’ arrivals rose by 4.6%, travel spending in Greece by non-residents fell by 3.7% year-on-year, while travel spending abroad by residents declined by 20.9%; as a result, a €66 million surplus was recorded, against a €7 million deficit in the first quarter of 2012.

The income account deficit fell by €806 million year-on-year, mainly owing to a sharp decline in net interest payments on Greek government bonds held by non-residents (following the PSI).

Finally, the current transfers balance showed a surplus of €1.7 billion, up by €324 million year-on-year. This development is mainly due to the fact that the sectors other than general government (mainly emigrants’ remittances) recorded net receipts of €244 million, against net payments of €51 million in the first quarter of 2012, while general government net transfer receipts (mainly from the EU) did not change considerably (they increased by a mere €29 million).

Capital transfers balance

In March 2013, the capital transfers surplus came to €461 million, compared with €32 million in March 2012, reflecting higher net 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 quarter of 2013, the capital transfers balance showed a surplus of €1.1 billion, up by €39 million year-on-year. This mainly reflects increased net EU capital transfers to general government.
The overall transfers balance (current transfers plus capital transfers) recorded a surplus of €2.8 billion in the first quarter of 2013, up by €363 million year-on-year, reflecting the above-mentioned development in EU current 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 €824 million in March 2013, compared with €2.2 billion in March 2012. In the first quarter of 2013, this balance showed a deficit of just €1.25 billion, compared with €3.76 billion in the same period of 2012 (down by 66.6%), i.e. it fell at a faster pace than the current account deficit.

Financial account balance

In March 2013, residents’ direct investment abroad showed a net outflow (increase) of €29.3 million (compared with a net outflow of €31.1 million in the same month of 2012), while non-residents’ direct investment in Greece recorded a net outflow (decline) of €10 million (compared with a net outflow of €103.8 million in the same month of 2012), without any remarkable transaction.

Under portfolio investment, a net outflow of €893 million was recorded (compared with a net outflow of €35.5 billion in March 2012). This outflow is attributable to, primarily, a €696 million rise in residents’ holdings of foreign bonds and Treasury bills and, secondarily, a €308.3 million decline in non-residents’ holdings of Greek government bonds and Treasury bills (outflow). These developments were partly offset by inflows of €173 million as a result of a decline in residents’ investment in foreign shares and €42 million due to an increase in non-residents’ holdings of shares of Greek firms.

Under “other” investment, a net inflow of €1.1 billion was recorded (compared with a net inflow of €37.9 billion in March 2012), which mainly reflects a €6.8 billion net decline in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (inflow). These developments were offset by a €4.1 billion net decrease (outflow) in non-residents’ deposit and repo holdings in Greece (including the TARGET account). There was also a €1.6 billion decline (outflow) in the net outstanding debt of the public and the private sector to non-residents.

In the January-March 2013 period, direct investment showed a net inflow of €1.3 billion (against a net outflow of €518 million in the same period of 2012). Specifically, non-residents’ direct investment in Greece showed a net inflow of €608 million, while residents’ direct investment abroad declined by €685 million (inflow).

Under portfolio investment, a net inflow of €543 million was observed (against a net outflow of €37.0 billion in the same period of 2012). Specifically, a capital inflow was recorded due to decreases of €1.8 billion and €357 million in residents’ investment in foreign bonds and shares, respectively. A capital inflow was also recorded on account of increases of €107 million and €147 million in non-residents’ purchases of shares and financial derivatives of Greek firms, respectively. In the same period, residents’ investment in foreign Treasury bills and financial derivatives rose by €217 million and €173 million, respectively (outflow), and there was a €1.4 billion decline in non-residents’ holdings of Greek government bonds and Treasury bills (outflow).

Under “other” investment, a net outflow of €1.7 billion (against a net inflow of €42.5 billion in the first quarter of 2012) is almost exclusively attributable to a €23.2 billion decrease in non-resident credit institutions’ and institutional investors’ deposit and repo holdings in Greece (outflow). This development was partly offset by a €15.8 billion decline in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (inflow), as well as a €5.7 billion rise in the net outstanding debt of the public and the private sector to non-residents (inflow).

At end-March 2013, 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 April 2013 will be released on 25 June 2013.

Related link: Balance of payments: March 2013 - Table