Press Releases

Balance of payments: FEBRUARY 2007

20/04/2007 - Press Releases

Current account balance

In February 2007, the current account deficit grew by €554 million year-on-year, to reach €3,109 million. This development reflects mainly the shift of the current transfers balance to a deficit (from a surplus in the same month of 2006) and, secondarily, increases in the trade deficit and the income account deficit.

The year-on-year rise in the overall trade deficit is accounted for by a €203 million hike in the trade deficit excluding oil and ships, which more than offset the declines in the net oil import bill and in net payments for purchases of ships (of €81 million and €22 million respectively).

The overall surplus of the services balance showed a small increase of €16 million, which is almost exclusively attributable to a rise in the surplus of the transport balance.

The widening of the income account deficit by €68 million mainly reflects higher interest payments on deposits and loans and, secondarily, increased net dividend payments, while net interest payments on Greek government bonds held by non-residents dropped slightly.

Most importantly, however, the current transfers balance shifted to a deficit of €289 million, from a surplus of €114 million in February 2006. This development is mainly accounted for by a considerable rise (of €287 million) in payments to the EU, reflecting a conjunctural increase in items (such as one-off contributions and refunds) not included in regular payments to the Community Budget. (It should be recalled that 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 - February 2007, the current account deficit widened by €1,136 million over the same period of 2006 and reached €5,913 million, reflecting mainly a rise in the trade deficit. Underlying the growth of the current account deficit were also a decline in the current transfers surplus and an increase in the income account deficit. By contrast, there was a small rise in the surplus of the services balance.

The widening of the overall trade deficit by €652 million was mainly the result of a €412 million increase in the trade deficit excluding oil and ships. Specifically, receipts from goods exports (excluding oil and ships) grew by €96 million or 5.6%, while the corresponding import bill rose by €508 million or 9.6%. During the same period, net payments for purchases of ships surged by €287 million or 85%. Finally, the net oil import bill dropped by €47 million or 3.2%.

The services surplus expanded by €55 million, reflecting improvements in all balances, notably the transport and travel balances. Specifically, it should be pointed out that gross receipts for travel services grew by €21 million or 6.9%, while gross receipts for transport services rose by €79 million or 3.5%.

The income account deficit increased by €169 million, as a result of higher net interest, dividend and profit payments.

Finally, underlying the considerable decline in the current transfers surplus by €370 million were higher gross payments to the EU by the general government sector, observed only in February.

Capital transfers balance

In February 2007, the capital transfers balance showed a surplus of €767 million, €694 million up 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.) Thus, despite the deficit observed in the current transfers balance, as already mentioned, the overall transfers balance showed a surplus which was considerably higher than in February 2006.

In January-February 2007, the capital transfers balance showed a surplus of €841 million, €733 million up year-on-year. This reflects exclusively a rise in EU capital transfers to general government. Thus, the overall transfers balance recorded a surplus of €986 million, which was by €363 million higher than in the same period of 2006.

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 €2,342 million in February 2007, €140 million down year-on-year. In January-February 2007, this deficit came to €5,072 million, compared with €4,668 million during the same period of 2006.

Financial account balance

In February 2007, a considerable net outflow of €1,829 million was recorded under direct investment. This reflects a €1,750 million outflow for residents' direct investment abroad, mainly owing to the completion of the acquisition of FINANSBANK (Turkey) by the National Bank of Greece (outflow of €1,722 million), as well as - to a much lesser extent - an outflow (of €79 million) recorded under non-residents' investment in Greece, partly owing to the sale of PFIZER HELLAS S.A. by its parent company to JANSSEN-CIGA PHARMACEUTICALS S.A. (outflow of €23 million). Under portfolio investment, a considerable net inflow of €2,416 million was recorded, chiefly reflecting non - residents' purchases of Greek government bonds and shares of Greek firms (of €3,725 million and €1,260 million respectively). These developments were partly offset by residents' purchases of foreign bonds, worth €2,401 million. ''Other'' investment recorded a net inflow of €1,628 million, mainly because the rise in non-resident credit institutions' deposit and repo holdings in Greece was more than double the increase in resident credit institutions' corresponding holdings abroad.

In January-February 2007, direct investment showed a net outflow of €1,901 million (compared with a net inflow of €364 million in the same period of 2006). Specifically, the outflows of residents' funds for direct investment abroad came to €1,844 million, while non-residents' direct investment in Greece showed an outflow (of €57 million). During the same period, a net inflow of €6,608 million was recorded under portfolio investment (compared with a net outflow of €663 million in the same period of 2006), as the inflow of non - residents' funds for investment in Greece (mainly in Greek government bonds and shares of Greek firms, of €6.6 billion and €2.8 billion respectively) largely exceeded outflows of residents' funds for investment in foreign bonds (worth €3.0 billion). Finally, under ''other'' investment, a net outflow of just €284 million (compared with a substantial net inflow of €4.7 billion in the first two months of 2006) mainly reflects the fact that the outflow of residents' funds to deposits and repos abroad and - to a much smaller extent-loan repayments were almost fully offset by non-residents' investment in deposits and repos in Greece.

At end - February 2007, Greece's reserve assets reached €2.1 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 March 2007 will be released on 22 May 2007.

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