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Balance of Payments: AUGUST 2008

20/10/2008 - Press Releases

Current account balance

In August 2008, the current account deficit grew by €167 million year-on-year, to reach €494 million, as a result of an expansion of the trade deficit and the income account deficit and a decline in the surplus of the current transfers balance. By contrast, the surplus of the services balance increased.

Despite a considerable €342 million decline in the trade deficit excluding oil and ships and a €48 million decrease in net payments for purchases of ships, the overall trade deficit grew by €42 million year-on-year owing to a large rise in the net oil import bill (of €432 million or 62.1%). In particular with respect to the trade deficit excluding oil and ships, export receipts increased by €143 million or 14.5%, while the import bill decreased by €198 million or 6.6%.

The surplus of the services balance grew by €262 million, as net transport and travel receipts rose by €127 million and €55 million, respectively, while net payments for other services dropped by €80 million.

The €175 million rise in the income account deficit is mostly attributable to an increase of net interest, dividend and profit payments.

The surplus of the current transfers balance dropped significantly by €211 million in comparison with August 2007, as net EU transfers to general government decreased by €181 million. (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 the January-August 2008 period, the current account deficit rose by €2,598 million over the corresponding period of 2007 and reached €21,989 million. This development reflects increases mainly in the trade deficit and, secondarily, in the income account deficit, which were only partly offset by a rise in the surpluses of the services balance and the current transfers balance.

The €3,620 million rise in the trade deficit is attributable to increases of €2,641 million, €954 million and €25 million in the net oil import bill, the trade deficit excluding oil and ships, and net payments for purchases of ships, respectively. Regarding in particular the trade balance excluding oil and ships, export receipts grew by €1,112 million or 14.0%, while the corresponding import bill rose by €2,066 million or 8.1%.

The surplus of the services balance expanded by €1,216 million, mostly reflecting higher net transport receipts (up €1,140 million). It should be noted that gross transport receipts (mainly from merchant shipping) increased by 22.8%. Net travel receipts rose by €242 million year-on-year, as gross receipts (i.e. travel spending in Greece by non-residents) grew by €415 million (or 5.0%), while gross payments (i.e. travel spending abroad by residents of Greece) increased by €173 million (or 11.2%). Net payments for other services rose by €166 million.

The income account deficit expanded by €1,068 million, 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 substantial increase of €874 million in the surplus of the current transfers balance is attributable mainly to a strong rise in EU transfers to general government and, secondarily, to a decline in general government payments to the EU.

Capital transfers balance

In August 2008, the capital transfers balance showed a surplus of €387 million, compared with a mere €13 million in August 2007. (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-August 2008 period, the capital transfers balance showed a surplus of €2,973 million (up €470 million year-on-year). Finally, the overall transfers balance (current transfers plus capital transfers) recorded a surplus of €5,558 million, up €1,344 million in comparison with the corresponding period of 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 €107 million in August 2008, i.e. lower than in August 2007 (€315 million). In the January-August 2008 period, this deficit came to €19,016 million, compared with €16,888 million in the corresponding period of 2007.

Financial account balance

In August 2008, residents' direct investment abroad came to €562 million. The most important investment concerned an outflow of €492 million by FORTHNET for the acquisition of the companies that owned the NOVA subscriber television platform. Non-residents' direct investment in Greece amounted to €217 million. The most important investment concerned an inflow of €103 million for the participation of EMIRATES INTERNATIONAL TELECOMMUNICATIONS LLC in the share capital increase of FORTHNET. Under portfolio investment, a net inflow of €4,204 million was recorded, attributable to residents' sales of foreign bonds (worth €2.5 billion) and non-residents' purchases of Greek government bonds and Treasury bills (worth €2.3 billion). These developments were partly offset by a €0.42 billion rise in residents' purchases of foreign shares and by non-residents' sales of shares of Greek firms (worth €0.16 billion). "Other" investment recorded a considerable net outflow of €3,350 million, mainly reflecting a large increase in domestic credit institutions' deposit and repo holdings abroad.

In the January-August 2008 period, direct investment showed a net inflow of €1,166 million. Specifically, net inflows of non-residents' funds for direct investment in Greece came to €3,021 million, while net outflows of residents' funds for direct investment abroad reached €1,854 million. During the same period, a net inflow of €12,593 million was recorded under portfolio investment. Specifically, the inflows due to non-residents' purchases of Greek government bonds and Treasury bills (of €19.4 billion) more than offset outflows due to residents' purchases of foreign bonds and Treasury bills (worth €5.5 billion) and non-residents' sales of shares of Greek firms (worth €1.4 billion). Finally, under "other" investment, a net inflow of €5,483 million is mainly attributable to the fact that the inflows of non-residents' funds for investment in deposits and repos in Greece (worth €25.4 billion) more than offset the increase in resident credit institutions' and institutional investors' corresponding investment abroad (worth €18.9 billion).

At end-August 2008, Greece's reserve assets reached €2.4 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 September 2008 will be released on 19 November 2008.

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