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Balance of Payments: November 2009

22/01/2010 - Press Releases

Current account balance

In November 2009, the current account deficit reached €2.8 billion, considerably lower than in November 2008 (€3.4 billion), due to, mainly, a large contraction of the trade deficit and, secondarily, a decrease in the income account deficit. These developments were partly offset by a decline in the surplus of the services balance, while the current transfers balance remained virtually unchanged.

The €650 million fall in the overall trade deficit stemmed from a decline of €295 million in the trade deficit excluding oil and ships (as the drop – in absolute terms – in the import bill was more than double that in export receipts), as well as decreases of €260 million and €95 million in the net oil import bill and net payments for purchases of ships, respectively.

The surplus of the services balance shrank by €236 million, mainly owing to a €188 million fall in net transport receipts, as gross transport (mainly shipping) receipts dropped substantially (by 20%). Net travel receipts also declined (by €23 million), as non-residents’ travel spending in Greece decreased year-on-year by 17% (residents’ travel spending abroad decreased by 9.2%). The income account deficit fell by €194 million, chiefly owing to lower net interest, dividend and profit payments. Finally, the current transfers balance showed a deficit of €65 million, down by €23 million year-on-year, as a result of a drop in net payments by 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-November 2009, the current account deficit narrowed by €8.1 billion or 25.7% year-on-year and reached €23.5 billion, 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 decline.

The €13 billion drop in the overall trade deficit is attributable to decreases of €7 billion, €4.6 billion and €1.4 billion 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 €9.5 billion or 25.0%, i.e. much more than export receipts, which declined by €2.5 billion or 19.2%.

The €4.5 billion 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 31.0%); as a result, net transport receipts dropped by €3.3 billion. Moreover, travel spending by non-residents in Greece decreased by 10.8%, while travel spending by residents abroad declined by 6.7%; as a result, net travel receipts fell by €1.1 billion. Finally, net payments for “other” services grew by €123 million.

The income account deficit dropped by €852 million in comparison with the same period of 2008, because net interest, dividend and profit payments decreased as a result of developments in the international and domestic money and capital markets. Finally, the surplus of the current transfers balance shrank by €1.2 billion as a result of declines in, mainly, EU transfers to general government and, secondarily, net receipts of the other sectors, as well as an increase in general government payments to the EU.

Capital transfers balance

In November 2009, the capital transfers balance showed a surplus of €429 million, almost half of that in November 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-November 2009, the capital transfers balance showed a surplus of €2 billion, compared with €3.9 billion 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 €3.2 billion, compared with €6.4 billion 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 reflects the economy’s external financing requirements) came to €2.4 billion in November 2009, compared with €2.5 billion in November 2008. In the January-November 2009 period, this deficit reached €21.6 billion, compared with €27.7 billion in the same period of 2008, i.e. it dropped by 22.2%.

Financial account balance

In November 2009, non-residents’ direct investment in Greece recorded a net inflow of €17 million. The most important transaction concerned a €29 million inflow for the participation of the German company “Ergo International” in the share capital increase of “Victoria Insurance S.A.”. Residents’ direct investment abroad showed a net outflow of €50 million, without any remarkable transactions.

Under portfolio investment, a net inflow of €8.2 billion was recorded, reflecting both a €4.9 billion decrease (inflow) in residents’ purchases of foreign government bonds and Treasury bills, and a €3.5 billion increase (inflow) in non-residents’ investment in Greek government bonds and Treasury bills. Moreover, there were outflows of €139 million due to a decline in non-residents’ investment in shares of Greek firms, as well as of €56 million and €35 million owing to a rise in residents’ investment in shares of foreign firms and foreign financial derivatives, respectively.

Under “other” investment, a net outflow of €5.4 billion was recorded, which is attributable to both a €2.9 billion rise (outflow) in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad, and a €2.7 billion decrease (outflow) in non-residents’ deposit and repo holdings in Greece. During the same period, there was an inflow of €206 million because of loans granted by non-residents to the public and the private sector.

In January-November 2009, direct investment showed a net inflow of €1.3 billion. Specifically, net inflows of non-residents’ funds for direct investment in Greece came to €2.3 billion (compared with €3.0 billion in the same period of 2008) and mainly concerned an increase in the participation of foreign investors in the capital of Emporiki Bank and the Hellenic Telecommunications Organisation (OTE), while net outflows of residents’ funds for direct investment abroad reached €1 billion (compared with €1.9 billion in the same period of 2008).

During the same period, a net inflow of €32.2 billion was recorded under portfolio investment. This mainly reflects inflows due to non-residents’ purchases of Greek government bonds and Treasury bills (of €35.0 billion) and shares of Greek firms (€0.9 billion). At the same time, an outflow was observed due to increases of €2.4 billion, €0.7 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 €11.5 billion reflects a €23.9 billion increase in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad, which was partly offset by a €7.8 billion rise in non-resident credit institutions’ and institutional investors’ corresponding holdings in Greece, as well as a €4.9 billion inflow for loans granted by non-residents to both the public and the private sector.

At end-November 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 December 2009 will be released on 19 February 2010.

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