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Balance of Payments: OCTOBER 2008

19/12/2008 - Press Releases

Current account balance

In October 2008, the current account deficit grew by ¤757 million year-on-year, to reach ¤3,670 million, as a result of, mainly, the expansion of the income account deficit and, secondarily, (a) a rise in the trade deficit excluding ships; (b) a shift of the current transfers balance from a relatively small surplus in October 2007 to a deficit; and (c) a decline in the surplus of the services balance.

As a result of a considerable ¤374 million decrease in net payments for purchases of ships, the overall trade deficit dropped by ¤22 million, despite increases in the net oil import bill and the trade deficit excluding oil and ships (of ¤158 million and ¤194 million, respectively). Regarding in particular the trade balance excluding oil and ships, export receipts showed a considerable increase (of ¤175 million or 15.0%), but the deficit grew, as the import bill rose more in absolute terms (by ¤369 million or 10.7%).

The surplus of the services balance narrowed by ¤163 million, as a small ¤31 million rise in net travel receipts was more than offset by a ¤91 million decline in net transport receipts, while net payments for other services grew by ¤103 million.

The ¤392 million rise in the income account deficit is mostly attributable to a hike in net interest, dividend and profit payments.

The surplus of the current transfers balance showed a deficit of ¤161 million, in comparison with a surplus of ¤63 million in October 2007, chiefly because of a rise in general government payments to the EU. (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-October 2008 period, the current account deficit rose by ¤4,357 million over the corresponding period of 2007 and reached ¤28.4 billion. This development reflects increases in, mainly, the trade deficit and, secondarily, 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 ¤4,314 million rise in the trade deficit is attributable to increases of ¤3,560 million and ¤999 million in the net oil import bill and the trade deficit excluding oil and ships, respectively, while net payments for purchases of ships dropped by ¤244 million. Regarding in particular the trade balance excluding oil and ships, export receipts grew considerably (by ¤1,687 million or 16.8%), while the corresponding import bill rose by ¤2,686 million or 8.3%.

The surplus of the services balance expanded by ¤1,024 million, mostly reflecting higher net transport receipts (up by ¤1,111 million). It should be noted that gross transport receipts (mainly from merchant shipping) increased considerably (by ¤2,784 million or 20.2%). Net travel receipts rose by only ¤210 million year-on-year, as gross receipts (i.e. travel spending by non-residents in Greece) showed a limited increase (of ¤356 million or 3.3%), while gross payments (i.e. travel spending by residents abroad) grew by ¤146 million (or 7.4%). Net payments for other services rose by ¤298 million.

The income account deficit expanded by ¤1,607 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 ¤541 million in the surplus of the current transfers balance is attributable to a strong rise (of ¤483 million) in EU transfers to general government, as well as a considerable decline (of ¤193 million) in general government payments to the EU, which more than offset a ¤135 million rise in net payments by the other sectors.

Capital transfers balance

In October 2008, the capital transfers balance remained virtually unchanged, as it showed a small deficit of ¤18 million, compared with a small surplus of ¤12 million in October 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-October 2008 period, the capital transfers balance showed a surplus of ¤3,024 million (up by ¤501 million year-on-year). Finally, the overall transfers balance (current transfers plus capital transfers) recorded a surplus of ¤5,560 million, up by ¤1,042 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 ¤3,688 million in October 2008, ¤788 million up year-on-year. In the January-October 2008 period, this deficit came to ¤25.3 billion, compared with ¤21.5 billion in the corresponding period of 2007.

Financial account balance

In October 2008, residents' direct investment abroad recorded a net inflow (disinvestment) of ¤22 million. The most important transaction in this category concerns an inflow (disinvestment) of ¤104 million due to the sale of ANTENNA's stake in a television channel in Bulgaria. Non-residents' direct investment in Greece showed a net outflow of ¤249 million. The two largest transactions in this category concerned (a) an outflow (disinvestment) of ¤150 million due to the sale to ALAPIS of BOXWOOD's 49% stake in the company GEROLYMATOS S.A.; and (b) an outflow (disinvestment) of ¤30 million - first instalment out of six - due to the sale to Wind Hellas of WIND PPC Holding's stake in TELLAS S.A. Under portfolio investment, a net outflow of ¤939 million was recorded, attributable to a ¤1,127 million decrease in non-residents' purchases of Greek government bonds and Treasury bills, non-residents' sales of shares of Greek firms (worth ¤1,176 million) and a ¤341 million rise in residents' investment in foreign financial derivatives. These developments were partly offset by residents' sales of foreign shares (worth ¤1,205 million) and a ¤420 million decline in residents' holdings of foreign bonds and Treasury bills. "Other" investment recorded a considerable net inflow of ¤4,606 million, mainly reflecting inflows of non-residents' funds (¤7,155 million) for investment in deposits and repos in Greece. This development more than offset a ¤2,458 million increase in domestic credit institutions' and institutional investors' deposit and repo holdings abroad.

In the January-October 2008 period, direct investment showed a net inflow of ¤898 million. Specifically, net inflows of non-residents' funds for direct investment in Greece came to ¤2,796 million, while net outflows of residents' funds for direct investment abroad reached ¤1,898 million. During the same period, a net inflow of ¤17.0 billion was recorded under portfolio investment. Specifically, the inflows due to non-residents' purchases of Greek government bonds and Treasury bills (of ¤20.2 billion) and residents' sales of foreign shares (worth ¤2.2 billion) more than offset outflows due to both residents' purchases of foreign bonds and Treasury bills (worth ¤2.0 billion) and non-residents' sales of shares of Greek firms (worth ¤2.8 billion). Finally, under "other" investment, a net inflow of ¤7.2 billion is mainly attributable to the fact that the inflows of non-residents' funds for investment in deposits and repos in Greece (worth ¤30.7 billion) more than offset the increase in resident credit institutions' and institutional investors' corresponding investment abroad (worth ¤22.1 billion).

At end-October 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 November 2008 will be released on 23 January 2009.

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