Press Releases

Balance of payments: May 2011

22/07/2011 - Press Releases

Current account balance

In May 2011, the current account balance showed a deficit of €1,998 million, compared to a surplus of €308 million in May 2010 (attributable to the high levels of EU transfers in that month of 2010).
The trade deficit remained almost unchanged, given that an improvement in the trade balance excluding oil and ships was offset by an increase in, mainly, the net oil import bill and, secondarily, net payments for purchases of ships. Specifically, export receipts excluding oil and ships rose at a high rate (20.3%) in May 2011, while the corresponding import bill showed no remarkable change (up by 1.6%).

The surplus of the services balance grew by €42 million as a result of lower net payments for “other” services and higher net travel receipts. In more detail, travel spending by non-residents in Greece grew by 9.8% in May year-on-year. By contrast, net transport receipts (chiefly from merchant shipping) fell by 22.6%, as gross receipts dropped by 10.1%, while the corresponding payments rose by 3.3%.

The income account deficit increased by €170 million as a result of a €162 million rise in net payments for interest, dividends and profits.

Finally, the current transfers balance showed a deficit of €137 million, compared with a surplus of €2,036 million in May 2010, chiefly as a result of net general government payments of €129 million, against net receipts of €2,022 million in May 2010. As already mentioned in previous press releases, the bulk of the funds allocated to general government under EU current transfers for the whole of 2011 was already absorbed during the first two months of 2011. (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-May 2011 period, the current account deficit fell by €586 million or 4.8% year-on-year, to €11.7 billion. This chiefly reflects a substantial decline of €2.0 billion in the non-oil trade deficit and a small rise in the services surplus, which more than offset a large rise in the net oil import bill, a widening of the income account deficit and a slight decrease in the current transfers surplus.

In more detail, the overall trade deficit decreased by €874 million, as a result of a €1.8 billion decline in the trade deficit excluding oil and ships and a €230 million drop in net payments for purchases of ships. By contrast, the net oil import bill rose by €1.2 billion. Most importantly, receipts from exports of goods excluding oil and ships rose by 17.4%, while the corresponding import bill declined by 8.9%.
A €79 million increase in the surplus of the services balance reflects lower net payments for “other” services and slightly higher net travel receipts, which more than offset a contraction in net transport receipts. Gross transport receipts (chiefly from merchant shipping) fell by 9.9% and the corresponding payments dropped by 9.4%; as a result, net receipts shrank by €291 million. Moreover, travel spending in Greece by non-residents grew by 5.6% year-on-year, while travel spending abroad by residents rose by 3.0%; as a result, net travel receipts grew by €64 million. According to data from the Bank of Greece’s border survey, in the January-May period non-resident travellers’ arrivals rose by 11.8% year-on-year.

The income account deficit rose by €316 million year-on-year, almost exclusively due to higher net payments for interest, dividends and profits (up by 9.2%).

Finally, the current transfers balance showed a surplus of €1,066 million, down by €51 million compared with the corresponding period of 2010. This development is due to the fact that the balance of the “other” sectors (mainly emigrants’ remittances) turned to a deficit of €133 million, from a €29 million surplus in the first five months of 2010. By contrast, net current transfers to general government (mainly from the EU) rose by €111 million.

Capital transfers balance

In May 2011, the capital transfers balance showed a surplus of €16 million, compared with a deficit of €12 million in May 2010. (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-May 2011 period, the capital transfers balance showed a surplus of €321 million, compared with €147 million in the corresponding period of 2010. This rise mostly reflects a €183 million increase in net EU capital transfers to general government. The overall transfers balance (current transfers plus capital transfers) recorded a surplus of €1,387 million, up by €123 million year-on-year, reflecting the above-mentioned development in EU current transfers.

Combined current account and capital transfers balance

In May 2011, the deficit of the combined current account and capital transfers balance (corresponding to the economy’s external financing requirements) reached €2 billion, compared with a surplus of €0.3 billion in May 2010. In the January-May 2011 period, this deficit came to €11.4 billion, compared with €12.1 billion in the corresponding period of 2010 (down by 6.3%).

Financial account balance

In May 2011, non-residents’ direct investment in Greece showed a net inflow of €286 million. The most important transaction concerns an inflow of €400 million for the acquisition of Specifar Pharmaceuticals SA by Watson Pharmaceuticals Inc. (United States). Residents’ direct investment abroad recorded a net outflow of €59 million, without any remarkable transactions.

Under portfolio investment, a net outflow of €4.3 billion was recorded, reflecting a €5.9 billion drop in non-residents’ purchases of Greek government bonds and Treasury bills (outflow), a €88 million decline in non-residents’ investment in shares of Greek firms (outflow) and increases of €86 million and €54 million in residents’ holdings of foreign financial derivatives and shares, respectively (outflow). These developments were partly offset by a €1.8 billion decline in residents’ holdings of foreign bonds and Treasury bills (inflow).

Under “other” investment, a net inflow of €6.5 billion was recorded, which is mainly attributable to a €10.9 billion increase in non-residents’ deposit and repo holdings in Greece, as well as a €25 million decline in the outstanding balance of loans extended by residents to non-residents (inflow). These developments were offset by a €3.8 billion rise in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (outflow) and by a net decline (outflow) of €588 million in the outstanding debt of the public and the private sector to non-residents.

In the January-May 2011 period, direct investment showed a net outflow of €115 million (compared with a net inflow of €458 million in the corresponding period of 2010). Specifically, net outflows of residents’ funds for direct investment abroad reached €423 million, while net inflows of non-residents’ funds for direct investment in Greece came to 308 million.

A net outflow of €9.7 billion was observed under portfolio investment (against a net outflow of €8.8 billion in the corresponding period of 2010). In more detail, an outflow was recorded due to, mainly, a decrease of €13.9 billion in non-residents’ holdings of Greek government bonds and Treasury bills and, secondarily, a €614 million increase in residents’ investment in foreign derivatives, as well as an €82 million decline in non-residents’ investment in shares of Greek firms. These developments were only partly offset by a €4.6 billion decline in resident credit institutions’ and institutional investors’ holdings of foreign bonds and Treasury bills and a €224 million decrease in residents’ holdings of shares of foreign firms.

Under “other” investment, a net inflow of €21.5 billion (compared with a net inflow of €20.8 billion in the same period of 2010) is mainly attributable to a €20.6 billion increase in the net outstanding debt of the public and the private sector to non-residents. In particular, the net general government borrowing came to €20.8 billion and the corresponding gross borrowing under the support mechanism for the Greek economy came to €21.4 billion. There was also an inflow as a result of a €1.0 billion increase in non-residents’ deposit and repo holdings.

At end-May 2011, Greece’s reserve assets stood at €4.6 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 2011 will be released on 18 August 2011.

Related link: Balance of payments: May 2011 - Table

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