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Balance of payments: DECEMBER 2008

19/02/2009 - Press Releases

Current account balance

In December 2008, the current account deficit declined by €1,813 million year-on-year and reached €3,127 million. During this month, the trade deficit dropped considerably and the current transfers balance shifted to a surplus, from a deficit in December 2007, while the services and the income account balances did not show any remarkable change.

The €1,115 million decrease in the overall trade deficit is attributable to a decline in the net oil import bill and net payments for purchases of ships (of €562 million and €389 million, respectively), and to a €164 million decrease in the trade deficit excluding oil and ships. Regarding in particular the trade balance excluding oil and ships, export receipts showed an increase of €62 million or 6.0%, while the import bill fell by €101 million or 3%.

The surplus of the services balance narrowed by €42 million, as the €90 million decline in net transport receipts more than offset the decreases in net payments for travel and other services (of €35 million and €13 million, respectively).

The small €16 million drop in the income account deficit is mostly attributable to a reduction in net interest, dividend and profit payments.

The current transfers balance showed a surplus of €310 million, in comparison with a deficit of €415 million in December 2007, chiefly because of a drop in general government payments to the EU. It should be recalled that in December 2007 these payments included a retroactive contribution (of €1.1 billion) by Greece to the Community Budget due to the upward revision of Greece's GDP. (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 2008, the current account deficit rose by €2.6 billion or 8.0% over 2007 and reached €35 billion, i.e. 14.5% of GDP (compared with 14.2% in 2007). This development reflects increases in, mainly, the trade deficit and, secondarily, the income account deficit, which were only partly offset by a rise in the surpluses of the current transfers balance and the services balance.

The €2.5 billion rise in the trade deficit is chiefly attributable to an increase of €2.9 billion in the net oil import bill. To a much smaller extent, it is also attributable to a €422 million rise in the trade deficit excluding oil and ships, as export receipts under this category grew by €1.8 billion, while the import bill rose by €2.3 billion. However, the growth rate of exports of goods excluding oil and ships (15.2%) was almost three times the growth rate of the corresponding imports (5.8%). By contrast, net payments for purchases of ships dropped by €808 million.

The surplus of the services balance expanded by €607 million, mostly reflecting higher net transport receipts (up by €704 million). It should be noted that gross transport receipts (mainly from merchant shipping) increased considerably in 2008 (by €2.2 billion or 13.3%), as up to and including October receipts on a monthly basis were higher than in the corresponding months of 2007, whereas in November and December they were lower. Net travel receipts rose by only €186 million year-on-year, as gross receipts (i.e. travel spending in Greece by non-residents) showed a limited increase (of €343 million or 3.0%), while gross payments (i.e. travel spending abroad by residents of Greece) grew by €157 million (or 6.3%). Net payments for other services rose by €284 million.

The income account deficit expanded by €1.8 billion, mainly as a result of higher net interest, dividend and profit payments. This development is largely associated with a rise in non-residents' public debt holdings.

Finally, the increase of €1.2 billion in the surplus of the current transfers balance is attributable to a rise (of €318 million) in EU transfers to general government, as well as to a considerable decline (of €1.1 billion, for the reason mentioned above) in general government payments to the EU.

Capital transfers balance

In December 2008, the capital transfers balance showed a surplus of €143 million (December 2007: €1,349 million). (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 2008, the capital transfers balance showed a surplus of €4.1 billion (slightly down by €242 million year-on-year). Finally, the overall transfers balance (current transfers plus capital transfers) recorded a surplus of €6.8 billion, up by €926 million in comparison to 2007.

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 €3 billion in December 2008, down by €607 million year-on-year. In 2008, this deficit came to €30.9 billion, compared with €28.1 billion in 2007.

Financial account balance

In December 2008, non-residents' direct investment in Greece recorded a net inflow of €153 million. The most important transaction in this category concerned an inflow of €28 million by the English company DIXONS for the acquisition of FOURLIS's stake in the company KOTSOVOLOS. Residents' investment abroad also recorded a net inflow of €222 million. The most important transactions in this category concerned on the one hand an inflow (disinvestment) of €520 million due to the sale of ANTENNA's investment in a TV channel in Bulgaria and, on the other hand, an outflow of €235 million for the participation of TITAN CEMENT ATLANTIC S.A. in the capital increases of TITAN AMERICA LLC in the United States (€166 million) and COLUMBUS PROPERTIES in the Netherlands (€69 million). Finally, a €42 million outflow was recorded, concerning the participation of the National Bank of Greece in the capital increase of the bank ROMANEASCA (Romania).

Under portfolio investment, a net inflow of €659 million was recorded, attributable to a €4.4 billion decline in residents' investment in foreign bonds and Treasury bills, and residents' sales of foreign shares (worth €0.3 billion). These developments were partly offset by a €3.5 billion outflow due to a decrease in non-residents' holdings of Greek Government bonds and Treasury bills, and non-residents' sales of shares of Greek firms (worth €0.4 billion). "Other" investment recorded a net inflow of €1.8 billion, mainly reflecting a €7.5 billion increase in non-residents' investment in deposits and repos in Greece, while domestic credit institutions' and institutional investors' deposit and repo holdings abroad rose by €5.4 billion. At the same time, an outflow of €0.3 billion was recorded, concerning repayments of loans granted by non-residents to the public and the private sector.

In 2008, direct investment showed a net inflow of €1.7 billion. Specifically, net inflows of non-residents' funds for direct investment in Greece came to €3.5 billion, while net outflows of residents' funds for direct investment abroad reached €1.8 billion. Moreover, in 2008, a net inflow of €16.4 billion was recorded under portfolio investment. Specifically, the inflows due to non-residents' purchases of Greek government bonds and Treasury bills (of €19.9 billion) and residents' sales of foreign shares (worth €2.9 billion) more than offset outflows due to both residents' purchases of foreign bonds and Treasury bills (worth €2.2 billion) and non-residents' sales of shares of Greek firms (worth €3.7 billion). Finally, under "other" investment, a net inflow of €12.1 billion is mainly attributable to the fact that the inflows of non-residents' funds for investment in deposits and repos in Greece (worth €40.9 billion) more than offset the increase in domestic credit institutions' and institutional investors' corresponding investment abroad (worth €27.0 billion).

At end-December 2008, Greece's reserve assets reached €2.5 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. 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 January 2009 will be released on 20 March 2009.

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