Balance of payments: June 2011
18/08/2011 - Press Releases
Current account balance
In June 2011 the current account deficit decreased by €258 million year-on-year, coming to €1,583 million.
The trade deficit fell by €183 million, mainly owing to an improvement in the trade balance excluding oil and ships, and, secondarily, a decline in the net import bill for oil and ships. Specifically, export receipts excluding oil and ships rose by 11.1%, while the corresponding import bill remained almost unchanged (+0.8%).
The surplus of the services balance grew by €126 million as a result, mainly, of higher net travel receipts, as well as lower net payments for “other” services; by contrast, net transport receipts declined. More specifically, travel spending by non-residents in Greece grew by 21.7% in June year-on-year. Gross transport receipts (mainly from merchant shipping) fell by 15.7%, while the corresponding payments declined only by 3.3%; as a result, net receipts fell by 25.7%.
The income account deficit increased by €75 million, mainly as a result of a €70 million rise in net payments for interest, dividends and profits.
Finally, the current transfers balance showed a deficit of €53 million, down by €24 million year-on-year (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 first half of 2011, the current account deficit fell by €844 million or 6.0% year-on-year, to €13.3 billion. This chiefly reflects the substantial decline of €2.2 billion in the non-oil trade deficit and a small rise in the services surplus, which more than offset a considerable 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 €1,057 million, as a result of a €1.9 billion decline in the trade deficit excluding oil and ships and a €301 million decrease in net payments for purchases of ships. By contrast, the net oil import bill rose by €1.1 billion. Most importantly, receipts from exports of goods excluding oil and ships rose by 16.2%, while the corresponding import bill declined by 7.3%.
A €205 million increase in the surplus of the services balance reflects higher net travel receipts and lower net payments for “other” services, which more than offset a contraction in net transport receipts. Gross transport receipts (chiefly from merchant shipping) fell by 11.0% and the corresponding payments deceased by 8.5%; as a result, net receipts shrank by €499 million. Also, travel spending by non-residents in Greece grew by 12.6% year-on-year, while travel spending by residents abroad remained almost unchanged (+0.2%). According to data from the Bank of Greece’s border survey, in the January-June period arrivals of non-resident travellers rose by 13.9% year-on-year.
The income account deficit rose by €391 million year-on-year, almost exclusively due to higher net payments for interest, dividends and profits (up by 8.2%).
Finally, the current transfers balance showed a surplus of €1,013 million, down by €27 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 €134 million, from a €14 million surplus in the first half of 2010. By contrast, net current transfers to general government (mainly from the EU) rose by €121 million.
Capital transfers balance
In June 2011, the capital transfers balance showed a deficit of €10.5 million, remaining almost unchanged year-on-year (June 2010: €11.0 million). (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 first half of 2011, the capital transfers balance showed a surplus of €310 million, compared with €136 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 €1,323 million, up by €147 million year-on-year, reflecting the above-mentioned development in EU current transfers.
Combined current account and capital transfers balance
In June 2011, the deficit of the combined current account and capital transfers balance (corresponding to the economy’s external financing requirements) reached €1.6 billion, compared with €1.9 billion in June 2010. In the first half of 2011, this deficit e came to €13.0 billion, compared with €14.0 billion in the corresponding period of 2010 (down by 7.3%).
Financial account balance
In June 2011, residents’ direct investment abroad recorded a net outflow of €459 million. The most significant transactions include an outflow of €587 million for the acquisition by the National Bank of Greece of the remaining 50% (it already held 50%) of the closed-end fund CPT London (United Kingdom) held by Credit Suisse. It should be noted that there was no flow of money for this investment, as the positions between the two counterparties were netted out. Further, there was an inflow of €184 million due to the reduction of the share capital of Coca Cola Cyprus and its return to the parent company, Coca Cola 3E S.A. Non-residents’ direct investment in Greece showed a net outflow of €132 million. The most significant transactions concern a €160 million outflow from the reduction of Coca Cola 3E S.A.'s share capital and the return of the sums involved to the shareholders (U.S.A.) and a €30 million inflow for the participation of Ganesa Energia S.A. in the increase of the share capital of its subsidiary “Energiaki Polimilou S.A.”.
Under portfolio investment, a net inflow of €30 million was recorded, reflecting a €991 million decline in residents’ holdings of foreign bonds and Treasury bills and a €30 million increase in non-residents’ investment in shares of Greek firms (inflow). These developments were almost entirely offset by a €950 million decline in non-residents’ holdings of Greek government bonds and Treasury bills and a €42 million increase in residents’ holdings of foreign financial derivatives (outflow).
Under “other” investment, a net outflow of €2.1 billion was recorded, which mainly reflects a €3.1 billion increase in non-residents’ deposit and repo holdings in Greece (inflow). This was partly offset by the €275 million rise in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (outflow) and the net decline by €752 million in the outstanding debt of the public and the private sectors to non-residents (outflow).
In the first half of 2011, direct investment showed a net outflow of €706 million (compared with a net inflow of €483 million in the corresponding period of 2010). Specifically, net outflows of residents’ funds for direct investment abroad reached €882 million, while net inflows of non-residents’ funds for direct investment in Greece came to €177 million.
A net outflow of €9.7 billion was observed under portfolio investment (against a net outflow of €5.0 billion in the corresponding period of 2010). In more detail, an outflow was recorded due to, mainly, a decrease of €14.8 billion in non-residents’ holdings of Greek government bonds and Treasury bills and, secondarily, a €657 million increase in residents’ investment in foreign derivatives, as well as an €53 million decline in non-residents’ investment in shares of Greek firms. These developments were only partly offset by a €5.6 billion decline in resident credit institutions’ and institutional investors’ holdings of foreign bonds and Treasury bills and a €226 million drop in residents’ holdings of shares of foreign firms.
Under “other” investment, a net inflow of €23.6 billion (compared with a net inflow of €18.7 billion in the corresponding period of 2010) is mainly attributable to a €19.9 billion increase in the outstanding debt of the public and the private sectors to non-residents; in particular, net borrowing of general government came to €20.3 billion during this period and gross general government borrowing under the support mechanism for the Greek economy came to €21.4 billion. There was also an inflow as a result of a €4.1 billion increase in non-residents’ deposit and repo holdings.
At end-June 2011, Greece’s reserve assets stood at €4.7 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 July 2011 will be released on 19 September 2011.
Related link: Balance of payments: June 2011 - Table