Balance of payments: MAY 2010
20/07/2010 - Press Releases
Current account balance
In May 2010, the current account balance showed a surplus of €250 million, compared to a deficit of €1,932 million in the corresponding month of 2009. This is mainly attributable to a large increase in the surplus of the current transfers balance, which reflects inflows from the European Agricultural Guidance and Guarantee Fund (EAGGF) for payment of direct aid under the CAP, which was expected (as mentioned in previous press releases). At the same time, the trade deficit and the income account deficit narrowed, while the surplus of the services balance grew.
The decrease in the trade deficit was accounted for by a decline of €276 million in the trade deficit excluding oil and ships, while net payments for purchases of ships and the net oil import bill rose by €47 million and €37 million, respectively.
The surplus of the services balance rose by €92 million as a result of a €198 million increase in net transport receipts, while net travel receipts fell by €95 million year-on-year.
The income account deficit shrank by €76 million due to lower net interest, dividend and profit payments.
Finally, the current transfers balance, as already mentioned, recorded a surplus of €2,040 million (compared with a surplus of just €218 million in May 2009), as a result of net receipts of €2,022 million by general government. (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 January-May 2010, the current account deficit grew by €399 million or 3.3% year- on-year and reached €12.6 billion, reflecting primarily a rise in the net oil import bill and, to a lesser extent, a decline in the surplus of the current transfers balance. These developments were partly offset by a fall in the income account deficit.
The €181 million rise in the overall trade deficit stemmed from an increase of €803 million in the net oil import bill. By contrast, the trade deficit excluding oil and ships narrowed by €651 million, as the import bill fell by €926 million (or 7.2%), while export receipts declined by €275 million (or 6%). Also, net payments for purchases of ships rose slightly (by €29 million).
The small €16 million decrease in the surplus of the services balance reflects lower net travel receipts. Specifically, travel spending in Greece by non-residents decreased by 8.8%, while travel spending abroad by residents of Greece declined by 11.5%; as a result, net travel receipts fell by €43 million. Gross transport receipts (chiefly from merchant shipping) showed an increase (of 11.9%), while the corresponding payments grew by 23.3%; as a result, net transport receipts rose by a mere €13 million. Finally, net payments for “other” services decreased by €15 million.
The income account deficit narrowed by €239 million in comparison with January-May of 2009, because net interest, dividend and profit payments fell by €260 million.
Finally, the current transfers balance showed a surplus of €1,157 million, compared with a surplus of €1,598 million in the corresponding period of 2009, mainly owing to a decline in EU transfers to general government.
Capital transfers balance
In May 2010, the capital transfers balance showed a deficit of €12 million, compared with a surplus of €13 million in May 2009. (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 January-May 2010, the capital transfers balance showed a surplus of €147 million, compared with €827 million in the corresponding period of 2009. This chiefly reflects a decline in EU capital transfers to general government. The overall transfers balance (current transfers plus capital transfers) recorded a surplus of €1,305 million, compared with a surplus of €2,425 million in the corresponding period of 2009.
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 €238 million in May 2010, compared with a deficit of €1,919 million in May 2009. In January-May 2010, this deficit of the combined current account and capital transfers balance came to €12.4 billion, compared with €11.4 billion in the corresponding period of 2009 (up by 9.5%).
Financial account balance
In May 2010, non-residents’ direct investment in Greece recorded a net inflow of €69 million. The most important transaction concerns an inflow of €50 million from the parent company CHABANA SA (Poland) for the purchase of new shares of its subsidiary in Greece HELLENIC STEEL. Residents’ direct investment abroad showed a net outflow of €178 million. The most important transactions in this category concerned a capital injection by EUROBANK to its branch in Poland EFG EUROBANK ERGASIAS SA POLKA A.K.
Under portfolio investment, a net outflow of €5.9 billion was recorded, reflecting mainly a €8.3 billion decrease (outflow) in non-residents’ investment in Greek government bonds and Treasury bills and a €337 million decline (outflow) in non-residents’ holdings of shares of Greek firms. In particular for Greek government securities, this outflow represents redemption of bonds maturing in May, which was financed by Support Mechanism funds, not by reinvestment. These developments were partly offset by declines (inflows) in residents’ holdings of foreign bonds and Treasury bills (€2.1 billion), foreign financial derivatives (€453 million) and shares of foreign firms (€153 million).
Under “other” investment, a net inflow of €6.0 billion was recorded, which mainly reflects a €20.2 billion increase (inflow) in the outstanding external debt of the public and the private sector. Of this amount, €20,051 million concern general government borrowing under the Support Mechanism of the Greek economy. These developments were partly offset by a €8.9 billion increase (outflow) in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad, and a €5.2 million decline (outflow) in non-residents’ deposit and repo holdings in Greece.
In January-May 2010, direct investment showed a net inflow of €798 million. Specifically, net inflows of non-residents’ funds for direct investment in Greece reached €1,169 million, while an outflow of €371 million was recorded under residents’ direct investment abroad.
During the same period, a net outflow of €8.8 billion was recorded under portfolio investment. Specifically, outflows were recorded due to decreases of €15.9 billion and €968 million in non-residents’ holdings of Greek government bonds/Treasury bills and shares of Greek firms, respectively. Outflows of €815 million and €289 million were also recorded owing to increases in residents’ holdings of foreign shares and financial derivatives, respectively. These developments were only partly offset by a €9.2 billion inflow due to a decline in resident credit institutions’ and institutional investors’ holdings of foreign bonds and Treasury bills.
Finally, under “other” investment, a net inflow of €20.9 billion is mainly attributable to general government borrowing (of the order of €20 billion), as already mentioned, as well as a €22 billion increase (inflow) in non-residents’ deposit and repo holdings in Greece. These developments were partly offset (approximately by half) by a €21.2 billion rise (outflow) in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad.
At end-May 2010, Greece’s reserve assets stood at €4.0 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.)
BALANCE OF PAYMENTS (EUR millions - provisional)
Note: Balance of payments data for June 2010 will be released on 18 August 2010.