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Balance of payments: April 2011

21/06/2011 - Press Releases

Current account balance

In April 2011, the current account deficit decreased to €2,309 million, from €2,898 million in April 2010, reflecting improvements in, mainly, the non-oil trade balance and, secondarily, all other balances (current transfers, services and income account).

The €266 million improvement in the trade balance reflects a continued rebound in receipts from exports of goods excluding oil and ships, which grew by 18.0% year-on-year, a 18.8% decrease in the corresponding import bill and a 23.4% decline in net payments for purchases of ships. By contrast, the net oil import bill rose substantially (by 67.3%).

The surplus of the services balance grew by €113 million, mainly as a result of lower net payments for “other” services and, secondarily, because net travel receipts rose slightly. Gross transport receipts (mainly from merchant shipping) fell by 11.8%, while the corresponding payments declined by 17.2%; as a result, net receipts fell by 4.2%.

The income account deficit narrowed by €36 million as a result of a €42 million drop in net interest, dividend and profit payments.

Finally, the current transfers balance showed a deficit of only €8.5 million, compared with a deficit of €182 million in April 2010, chiefly as a result of net general government receipts of €14.6 million, against net payments of €147.6 million in April 2010. (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-April 2011 period, the current account deficit fell by €2.9 billion or 23.4% year-on-year, to €9.7 billion. This development reflects primarily a large increase of €2.3 billion in the current transfer receipts of general government (mainly from the EU), a €1.3 billion decline in the non-oil import bill and a €1.1 billion rise in export receipts (including oil), which more than offset mainly a €1.5 billion increase in the gross oil import bill.

In more detail, the overall trade deficit shrank by €878 million, as a result of a €1,670 million decrease in the trade deficit excluding oil and ships and a €265 million fall in net payments for purchases of ships, which more than offset a €1,056 million rise in the net oil import bill. Most importantly, receipts from exports of goods excluding oil and ships rose by 16.6%, while the corresponding import bill declined by 11.3%.

A €65 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. Both gross transport receipts (chiefly from merchant shipping) and the corresponding payments showed a decline; as a result, net receipts dropped by €137 million. Moreover, travel spending by non-residents in Greece grew by 5.4% in comparison with the corresponding period of 2010, while travel spending by residents abroad rose by 4.7%. As a result, net travel receipts increased by €11 million. Non-residents’ arrivals rose by 15.2% year-on-year in the January-April 2011 period.

The income account deficit rose by €146 million year-on-year, almost exclusively due to higher net interest, dividend and profit payments (up by 5.0%).

Finally, the current transfers balance showed a surplus of €1,227 million, compared with a deficit of €920 million in the corresponding period of 2010, mainly as a result of an increase in EU transfers to general government, concerning direct aid and subsidies under the Common Agricultural Policy. As already mentioned in previous press releases, due to the quick implementation of the relevant procedures, the bulk of the funds allocated to general government under EU current transfers for the whole of 2011 had already been absorbed during the first two months of 2011.

Capital transfers balance

In April 2011, the capital transfers balance showed a deficit of €7 million, compared with a surplus of €11 million in April 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-April 2011 period, the capital transfers balance showed a surplus of €305 million, compared with €159 million in the corresponding period of 2010. This rise mostly reflects a €152 million increase in EU capital transfers to general government. The overall transfers balance (current transfers plus capital transfers) recorded a surplus of €1,532 million, compared with a deficit of €761 million in the corresponding period of 2010, reflecting the above-mentioned development in EU current transfers.

Combined current account and capital transfers balance

In April 2011, the deficit of the combined current account and capital transfers balance (corresponding to the economy’s external financing requirements) reached €2.3 billion, compared with €2.9 billion in April 2010. In the January-April 2011 period, this deficit came to €9.4 billion, compared with €12.4 billion in the corresponding period of 2010 (down by 24.8%).

Financial account balance

In April 2011, non-residents’ direct investment in Greece showed a net inflow of €16 million, without any remarkable transactions. Residents’ direct investment abroad recorded a net outflow of €46 million, likewise without any remarkable transactions.

Under portfolio investment, a net inflow of €633 million was recorded, reflecting a €1.5 billion decrease in residents’ holdings of foreign bonds and Treasury bills (inflow). This was partly offset by a €711 million decrease in non-residents’ holdings of Greek government bonds and Treasury bills, a €96 million decline in non-residents’ investment in shares of Greek firms (outflow) and a €136 million increase in residents’ holdings of foreign bonds and financial derivatives (outflow).

Under “other” investment, a net inflow of €1.9 billion was recorded, which is mainly attributable to a €2.7 billion increase in non-residents’ deposit and repo holdings in Greece, as well as a €228 million rise in the outstanding debt of the public and the private sector to non-residents (inflow). These developments were offset by a €1 billion increase in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (outflow).

In the January-April 2011 period, direct investment showed a net outflow of €342 million (compared with a net inflow of €635 million in the corresponding period of 2010). Specifically, net outflows of residents’ funds for direct investment abroad reached €364 million, while net inflows of non-residents’ funds for direct investment in Greece were marginally positive (only €22 million).

A net outflow of €5.4 billion was recorded under portfolio investment (against a net inflow of €2.9 billion in the corresponding period of 2010). In more detail, an outflow was recorded due to, mainly, a decrease of €8.0 billion in non-residents’ holdings of Greek government bonds and Treasury bills and, secondarily, a €528 million increase in residents’ investment in foreign derivatives. These developments were only partly offset by a €2.8 billion decline in resident credit institutions’ and institutional investors’ holdings of foreign bonds and Treasury bills and a €278 million drop in residents’ holdings of shares of foreign firms.

Under “other” investment, a net inflow of €15.4 billion (compared with a net inflow of €14.8 billion in the corresponding period of 2010) is mainly attributable to a €21.3 billion increase in the outstanding debt of the public and the private sector to non-residents (of which €21.1 billion concern net general government borrowing, which reflects gross borrowing of €21.4 billion under the support mechanism for the Greek economy). An inflow was also recorded due to a €4.0 billion fall in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad. These developments were partly offset by a €9.8 billion decline in non-residents’ holdings of deposits and repos in Greece (outflow).

At end-April 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 May 2011 will be released on 22 July 2011.

Related link: Balance of payments: April 2011 - Table

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