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Balance of payments: MAY 2007

20/07/2007 - Press Releases

Current account balance

In May 2007, the current account deficit grew by €146 million year-on-year, to reach €2,094 million. This development reflects mainly a widening of the trade deficit and, secondarily, a small decline in the current transfers surplus. By contrast, the surplus of the services balance grew considerably and the income account deficit decreased, largely offsetting the deterioration of the trade deficit.

The year-on-year increase of €417 million in the overall trade deficit is due to increases in the net oil import bill, the trade deficit excluding oil and ships and net payments for purchases of ships (of €185 million, €124 million and €108 million respectively).

The overall surplus of the services balance showed a €268 million increase, as a result of a considerable rise in net transport receipts, while net travel and other services receipts also recorded a small increase.

The €48 million decrease in the income account deficit is almost exclusively attributable to lower net interest, dividend and profit payments.

Finally, the surplus of the current transfers balance fell by €46 million year-on-year, mainly because net EU transfers to both general government and the other sectors dropped. (It should be recalled that gross current transfers from the EU mainly include receipts from the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) in the context of the Common Agricultural Policy, 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 January-May 2007, the current account deficit expanded by €2,033 million over the same period of 2006 and reached €14,289 million, reflecting mainly the growth of the trade deficit and a decrease in the current transfers surplus, and, to a lesser extent, a widening of the income account deficit. By contrast, the services surplus rose.

The growth of the overall trade deficit by €1,146 million was mainly a result of increases in the trade deficit excluding oil and ships and in net payments for purchases of ships (of €840 million and €523 million respectively). By contrast, the net oil import bill dropped by €218 million. With respect to the trade balance excluding oil and ships, export receipts grew by €338 million or 7.4%, while the corresponding import bill rose by €1,179 million or 8.3%.

The services surplus expanded by €385 million, reflecting a rise mainly in net transport receipts and, to a lesser extent, in net travel receipts, while net payments for other services grew. It should be noted that gross transport receipts increased by 8.6% and gross travel receipts by 3.5%.

The income account deficit rose by €395 million, mainly as a result of higher net interest, dividend and profit payments.

Finally, underlying the decline of €878 million in the current transfers surplus were on the one hand higher general government payments to the EU (mainly in February) and, on the other hand, lower receipts (in the February-May period).

 

Capital transfers balance

In May 2007, the capital transfers balance showed a very small surplus (of €3.5 million, compared with €279 million in May 2006). (Capital transfers mainly include receipts from the Structural Funds - except for the European Social Fund – and the Cohesion Fund under the Community Support Framework.)

In January-May 2007, the capital transfers balance showed a surplus of €2,276 million, €825 million up year-on-year. This reflects almost exclusively a rise in EU capital transfers to general government. Thus, the overall transfers balance recorded a surplus of €2,962 million, which was €53 million lower than in the same period of 2006.

 

Combined current account and capital transfers balance (according to the old method of presentation)

The combined current account and capital transfers balance (according to the old method of presentation) showed a deficit of €2,090 million in May 2007, €422 million up year-on-year. In January-May 2007, this deficit came to €12,013 million, €1,208 million up year-on-year.

 

Financial account balance

In May 2007, residents’ direct investment abroad came to €149 million. The most important investment concerned a €50 million outflow for the participation of PIRAEUS BANK in the share capital of its subsidiary PIRAEUS BANK ROMANIA in Romania. During the same month, non-residents’ direct investment in Greece came to €51 million. The most important investments concerned an inflow of €36 million from the sale of real estate by BABIS VOVOS INTERNATIONAL CONSTRUCTION S.A. to the German company KANAM GRUND and an inflow of €23 million for the partial acquisition of FOURLIS Holdings S.A. by DSG INTERNATIONAL PLC (England). Under portfolio investment, a net inflow of €2,496 million was recorded, mainly reflecting non-residents’ purchases of Greek government bonds and, to a much lesser extent, shares of Greek firms (of €3,730 million and €471 million respectively). These developments were partly offset by residents’ purchases mainly of foreign bonds and secondarily of foreign shares and Treasury bills, worth €1,098 million, €440 million and €260 million respectively. "Other" investment recorded a net outflow of €150 million, as the rise in non-resident credit institutions’ deposit and repo holdings in Greece was more than offset by the increase in resident credit institutions’ and institutional investors’ corresponding investment abroad.

In January-May 2007, direct investment showed a net outflow of €2,071 million. Specifically, net inflows of non-residents’ funds for direct investment in Greece came to €508 million, while net outflows of residents’ funds for direct investment abroad reached €2,579 million. During the same period, a net inflow of €13,972 million was recorded under portfolio investment, as the inflow of non-residents’ funds for investment in Greece (mainly in Greek government bonds and shares of Greek firms, of €15.9 billion and €4.6 billion respectively) was considerably higher than outflows of residents’ funds for investment mainly in foreign bonds (worth €5.6 billion). Finally, under “other” investment, a small net inflow of €567 million mainly reflects the fact that the inflow of non-residents’ funds for investment in deposits and repos in Greece was largely offset by residents’ investment in deposits and repos abroad and, to a smaller extent, by repayments of loans granted by non-residents to residents.

At end-May 2007, Greece’s reserve assets reached €2.3 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 June 2007 will be released on 20 August 2007.

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