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Balance of payments: OCTOBER 2007

19/12/2007 - Press Releases

Current account balance

In October 2007, the current account deficit grew by €798 million year-on-year, to reach €2,854 million. This month saw a widening mainly of the trade deficit and, secondarily, of the income account deficit, as well as a narrowing of the surplus of the current transfers balance. These developments were only partly offset by an increase in the surplus of the services balance.

The year-on-year increase of €770 million in the overall trade deficit is attributable to, mainly, a €391 million rise in net payments for purchases of ships and, secondarily, increases of €194 million and €185 million in the trade deficit excluding oil and ships and the net oil import bill respectively.

The overall surplus of the services balance widened by €277 million, as a result of, mainly, an increase (of €271 million) in net transport receipts and, secondarily, a small decline (of €32 million) in net payments for other services. By contrast, net travel receipts decreased by €26 million during this month.

The €128 million rise in the income account deficit is mainly attributable to higher net interest, dividend and profit payments.

Finally, the surplus of the current transfers balance fell considerably year-on-year, because general government payments to the EU were higher than the corresponding receipts. (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-October 2007, the current account deficit expanded by €5,634 million over the same period of 2006 and reached €23,831 million, reflecting the growth mainly of the trade deficit and, secondarily, of the income account deficit, as well as – to a smaller extent – a decrease in the current transfers surplus. By contrast, the services surplus rose.

The €4,557 million rise in the overall trade deficit was mainly a result of increases (of €2,941 million and €1,679 million) in the trade deficit excluding oil and ships and in net payments for purchases of ships, respectively, while the net oil import bill showed a small decline (of €63 million). With respect to the trade balance excluding oil and ships, export receipts grew by €544 million or 5.7%, i.e. less than the corresponding import bill, which rose by €3,485 million or 12.2%.

The services surplus expanded by €1,032 million, reflecting a rise mainly in net transport receipts. The increase in net travel receipts was small, while net payments for other services grew. It should be noted that gross transport receipts (mainly from merchant shipping) increased by 15.5% and gross travel receipts by 1.0%.

The income account deficit rose by €1,578 million, as a result of higher net interest, dividend and profit payments. This development is associated with a rise in non-residents' public debt holdings, as well as the increase in interest rates.

Finally, underlying the decline of €532 million in the current transfers surplus were decreases mainly in net receipts of the other sectors (i.e. excluding general government) and, secondarily, in general government net receipts from the EU (of €353 million and €179 million, respectively). It should be noted that EU current transfers to general government rose by €30 million, while payments to the EU grew by €209 million.

 

Capital transfers balance

In October 2007, the capital transfers balance showed a small surplus of €12 million, compared with €70 million in October 2006. (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-October 2007, the capital transfers balance showed a surplus of €2,523 million, €388 million up year-on-year. This reflects a rise in EU capital transfers to general government. Thus, the overall transfers balance (current transfers plus capital transfers) recorded a surplus of €4,518 million, compared with €4,662 million 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 €2,842 million in October 2007, compared with a deficit of €1,986 million in the same month of 2006. In January-October 2007, this deficit came to €21,308 million, compared with €16,062 million in the same period of 2006.

Financial account balance

In October 2007, residents' direct investment abroad came to €161 million, of which €99 million concerned capital injections by EUROBANK to its branches in Poland (related to the expansion of the bank's network). During the same month, non-residents' investment in Greece recorded an inflow of €152 million, of which €30 million concerned the participation of T.B.U. INTERNATIONAL (Luxembourg) in the share capital increase of DIONYSUS LEISURE S.A.

Under portfolio investment, a net outflow of €584 million was recorded, reflecting mainly the fact that net outflows of residents' funds for purchases of foreign bonds and Treasury bills (worth €2,291 million) more than offset inflows of non-residents' funds for purchases of Greek government bonds and Treasury bills (worth €612 million) and shares of Greek firms (worth €546 million).

"Other" investment recorded a net inflow of €3,006 million, mainly because of a rise in non-resident credit institutions' deposit and repo holdings in Greece.

In January-October 2007, direct investment showed a net outflow of €2,460 million. Specifically, net inflows of non-residents' funds for direct investment in Greece came to €833 million, while net outflows of residents' funds for direct investment abroad reached €3,293 million. During the same period, a net inflow of €15.7 billion was recorded under portfolio investment, as the inflow of non-residents' funds for investment in Greece (mainly in Greek government bonds and Treasury bills, of €23.4 billion, as well as shares of Greek firms, of €8.4 billion) was considerably higher than outflows of residents' funds for investment mainly in foreign bonds and Treasury bills (worth €14.7 billion), as well as foreign shares (worth €0.9 billion). Finally, under "other" investment, a net inflow of €8.4 billion mainly reflects the fact that the inflow of non-residents' funds for investment in deposits and repos in Greece was almost double the outflow of residents' funds for investment in deposits and repos abroad. At end-October 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 November 2007 will be released on 25 January 2008.

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