Balance of Payments: October 2009
18/12/2009 - Press Releases
Current account balance
In October 2009, the current account deficit came to €2,489 million, i.e. a level considerably lower than in October 2008, due, mainly, to a large contraction of the trade deficit and, secondarily, to a decrease in the income account deficit. These developments more than offset a decline in the surplus of the services balance and an increase in the deficit of the current transfers balance.
The €1,354 million fall in the overall trade deficit stemmed from declines of €973 million and €380 million in the trade deficit excluding oil and ships (as the drop – in absolute terms – in the import bill was almost four times the decrease in export receipts) and in the net oil import bill, respectively; net payments for purchases of ships were practically unchanged.
The surplus of the services balance shrank by €373 million, mainly owing to a €322 million fall in net transport receipts, as gross transport receipts (mainly from shipping) fell substantially (by 34.3%). Net travel receipts also decreased (by €75 million). Specifically, travel spending in Greece by non-residents dropped by 8.5% year-on-year, while travel spending abroad by residents of Greece rose marginally (by 1.4%). The income account deficit fell by €272 million, chiefly owing to lower net interest, dividend and profit payments. Finally, the current transfers balance showed a deficit of €217 million, up by €56 million year-on-year, as a result of, mainly, a decline in the net receipts of the sectors other than general government. (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 2009, the current account deficit narrowed by €7,406 million or 26.2% year-on-year and came to €20,821 million, reflecting primarily a large decrease in the trade deficit and – to a much lesser extent – a decline in the income account deficit. At the same time, however, the surpluses of the services balance and the current transfers balance showed a sharp decrease.
The €12,354 million drop in the overall trade deficit is attributable to decreases of €6,684 million, €4,349 million and €1,321 million in the trade deficit excluding oil and ships, the net oil import bill and net payments for purchases of ships, respectively. Regarding the trade deficit excluding oil and ships, the import bill fell by €8,981 million or 25.8%, i.e. much more than export receipts, which declined by €2,296 million or 19.6%.
The €4,339 million contraction of the surplus of the services balance mainly reflects lower net transport and travel receipts. Gross transport receipts (chiefly from merchant shipping) fell considerably (by 31.9%); as a result, net transport receipts dropped by €3,094 million. Moreover, travel spending in Greece by non-residents decreased by 11.4%, while travel spending abroad by residents of Greece declined by 5.7%; as a result, net travel receipts fell by €1,147 million. Finally, net payments for “other” services grew by €98 million.
The income account deficit dropped by €658 million in comparison with the same period of 2008, because net interest, dividend and profit payments decreased as a result of developments in international money and capital markets. Finally, the surplus of the current transfers balance narrowed by €1,268 million due to, mainly, lower EU transfers to general government and, secondarily, lower receipts of the other sectors, as well as higher government payments to the EU.
Capital transfers balance
In October 2009, the capital transfers balance showed a surplus of €14 million, compared with a deficit of €18 million in October 2008. (Capital transfers 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 2009, the capital transfers balance showed a surplus of €1,535 million, compared with €3,024 million in the same period of 2008. This chiefly reflects a decline in EU capital transfers to general government. Thus, the overall transfers balance (current transfers plus capital transfers) recorded a surplus of €2,803 million, compared with €5,560 million in the same period of 2008.
Combined current account and capital transfers balance
The deficit of the combined current account and capital transfers balance (which corresponds to the economy’s external financing requirements) came to €2,475 million in October 2009, compared with €3,703 million in October 2008. In the January-October 2009 period, this deficit reached €19,286 million, compared with €25,202 million in the corresponding period of 2008, i.e. it dropped by 23.5%.
Financial account balance
In October 2009, residents’ direct investment abroad recorded a net outflow of €251 million. The most important transaction in this category concerned a €197 million outflow for the participation of Cosmote Mobile Telecommunications S.A. in the capital increase of Cosmoholding Romania Ltd (Cyprus). Non-residents’ direct investment in Greece showed a net inflow of €21 million, without any remarkable transactions.
Under portfolio investment, a net inflow of €931 million was recorded, reflecting both a €704 million decrease (inflow) in residents’ purchases of foreign government bonds and Treasury bills and a €595 million decline (inflow) in residents’ investment in shares of foreign firms. These developments were partly offset by an outflow due to a €225 million increase in residents’ investment in foreign financial derivatives and a €230 million drop (outflow) in non-residents’ investment in Greek government bonds and Treasury bills.
Under “other” investment, a net inflow of €1.5 billion was recorded, which is mainly attributable to a €3.3 billion increase in non-residents’ deposit and repo holdings in Greece, which was partly offset by a €1.6 billion increase (outflow) in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad and a €179 million outflow due to the repayment of loans which had been granted by non-residents to the public and the private sector.
In January-October 2009, direct investment showed a net inflow of €1.4 billion. Specifically, net inflows of non-residents’ funds for direct investment in Greece came to €2,324 million (compared with €2,458 million in the corresponding period of 2008) and mainly concerned an increase in the participation in the share capital of Emporiki Bank and the Hellenic Telecommunications Organisation (OTE), while net outflows of residents’ funds for direct investment abroad reached €955 million (compared with €1,766 million in the corresponding period of 2008).
During the same period, a net inflow of €24.0 billion was recorded under portfolio investment. This mainly reflects inflows due to non-residents’ purchases of Greek government bonds and Treasury bills (of €31.5 billion) and shares of Greek firms (€1 billion). At the same time, an outflow was observed due to increases of €7.2 billion, €0.6 billion and €0.7 billion in residents’ investment in foreign bonds/Treasury bills, shares and financial derivatives, respectively.
Finally, under “other” investment, a net outflow of €6.0 billion reflects a €20.9 billion increase in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad, which was only partly offset by a €10.5 billion rise in non-resident credit institutions’ and institutional investors’ corresponding holdings in Greece, as well as a €4.7 billion inflow for loans granted by non-residents to both the public and the private sector.
At end-October 2009, Greece’s reserve assets stood at €3.5 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 November 2009 will be released on 22 January 2010.