Press Releases

Balance of payments: JUNE 2009

18/08/2009 - Press Releases

Current account balance

In June 2009, the current account deficit dropped by €633 million year-on-year to €2,344 million, reflecting mainly a large contraction of the trade deficit. Moreover, the income account deficit fell slightly. At the same time, however, the surplus of the services balance narrowed, while the current transfers balance shifted to a deficit, from a surplus in June 2008.

The €1,538 million decline in the overall trade deficit stemmed from a €1,039 million drop in the trade deficit excluding oil and ships (as the import bill fell by 31.6%, i.e. at a rate almost double that of export receipts, which decreased by 16.9%) and declines of €407 million and €92 million in the net oil import bill and net payments for purchases of ships, respectively.

 The surplus of the services balance shrank by €546 million, mainly owing to a fall in net transport and travel receipts (of €356 million and €164 million, respectively). Specifically, non-residents’ travel spending in Greece dropped by 10.4%, while residents’ travel spending abroad remained almost unchanged year-on-year (it only rose by 1.8%). Regarding the transport balance, both receipts and payments fell considerably (by 34.7% and 28.7%, respectively). The income account deficit decreased by €70 million, mainly owing to lower net interest, dividend and profit payments. Finally, the current transfers balance shifted to a deficit of €145 million, from a surplus of €285 million in June 2008, mainly because general government receipts from the EU declined substantially and the corresponding payments doubled. (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-June 2009, the current account deficit narrowed by €4,407 million or 23.0% year-on-year and reached €14,740 million, reflecting a large decrease in the trade deficit. At the same time, however, the surpluses of the services balance and the current transfers balance shrank, while the income account deficit did not show any remarkable change (it rose by a mere 0.9%).

 The €7,414 million drop in the overall trade deficit is attributable to decreases of €4,349 million, €2,356 million and €709 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 €5,279 million or 25.4%, i.e. much more than export receipts, which declined by €930 million or 14.2%.

 The surplus of the services balance shrank by €2,034 million, mainly reflecting lower net transport and travel receipts. It should be noted that gross transport receipts (chiefly from merchant shipping) fell considerably (by 28.4%); as a result, net transport receipts dropped by €1,480 million. Moreover, travel spending in Greece by non-residents and travel spending abroad by residents decreased (by 14.7% and 5.4%, respectively); as a result, net travel receipts declined by €463 million. Finally, payments for “other” services grew by €90 million.

 The income account deficit was contained at around last year’s levels, because net interest, dividend and profit payments showed a small decrease, as a result of international money market developments. Finally, the surplus of the current transfers balance showed a decline of €930 million, almost half of which is attributable to the decrease recorded in June 2009, as already mentioned.

Capital transfers balance

In June 2009, the capital transfers balance showed a surplus of €74 million, almost unchanged year-on-year. (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-June 2009, the capital transfers balance showed a surplus of €902 million, compared with €2,184 million in the same period of 2008. This mainly reflects a decline in EU capital transfers to general government. Thus, the overall transfers balance (current transfers plus capital transfers) recorded a surplus of €2,355 million, compared with €4,567 million in the same period of 2008.

Combined current account and capital transfers balance (according to the old method of presentation)

The deficit of the combined current account and capital transfers balance (which reflects the economy’s external financing requirements) came to €2,269 million in June 2009, compared with €2,900 million in June 2008. In the January-June 2009 period, this deficit reached €13,838 million, compared with €16,963 million in the same period of 2008, i.e. it dropped by 18.4%.

 Financial account balance

 In June 2009, residents’ direct investment abroad showed a net outflow of €116 million. The most important transaction in this category concerned a €25 million outflow for the acquisition of shares of Bank Post SA (Romania) by EUROBANK. Non-residents’ direct investment in Greece recorded a net inflow of €151 million. The most important transaction in this category concerned a €95 million inflow for the acquisition of 50% of the company HERON II VIOTIA THERMOELECTRIC STATION SA by the Dutch company ELECTRABEL INTERNATIONAL.

Under portfolio investment, a net inflow of €3.3 billion was recorded, mainly reflecting a €3.6 billion increase (inflow) in non-residents’ investment in Greek bonds and Treasury bills, which was offset to a very small extent by a €0.2 billion rise (outflow) in residents’ purchases of foreign bonds and Treasury bills and a €0.2 billion decline in non-residents’ investment in shares of Greek firms.

 Under “other” investment, an outflow of €0.9 billion was recorded, which is almost equal to the outflow for the repayment of loans granted to the public and the private sector by non-residents. The €6.7 billion increase (inflow) in non-resident credit institutions’ and institutional investors’ deposit and repo holdings in Greece offset an equal (€6.7 billion) rise (outflow) in residents’ corresponding deposit and repo holdings abroad.

 In January-June 2009, direct investment showed a net inflow of €1.2 billion. Specifically, net inflows of non-residents’ funds for direct investment in Greece came to €1,706 million, while net outflows of residents’ funds for direct investment abroad reached €506 million.

 During the same period, a net inflow of €23.2 billion was observed under portfolio investment. This mainly reflects inflows due to non-residents’ purchases of Greek government bonds and Treasury bills (of €20.8 billion), as well as an inflow owing to a €2.9 billion decrease in residents’ investment in foreign bonds and Treasury bills.

 Finally, under “other” investment, a net outflow of €9.8 billion reflects a €15.4 billion increase (outflow) in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad and a €2.9 billion outflow for the repayment of loans granted by non-residents to both the public and the private sector. These developments by far more than offset the inflow recorded due to a €8.6 billion rise in non-residents’ deposit and repo holdings in Greece

At end-June 2009, Greece’s reserve assets stood at €2.7 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 2009 will be released on 18 September 2009.

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