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Balance of payments: October 2012

20/12/2012 - Press Releases

Current account balance

In October 2012, the current account balance showed a deficit of €684 million, i.e. less than half of the current account deficit in October 2011.

The trade deficit narrowed by €496 million, as a result of a €324 million decrease in the trade deficit excluding oil and ships, as well as declines of €63 million and €109 million in net payments for purchases of ships and the net oil import bill, respectively. The trade deficit excluding oil and ships shrank due to a reduction of payments for imports by €204 million (or 9.6%), as well as to a €120 million (or 10.2%) rise in export receipts.

The surplus of the services balance fell by €247 million owing to lower net receipts from travel and transport services, whereas the “other services” balance shifted to a small deficit in October 2012, from a surplus in the same month of 2011. In more detail, compared with October 2011, travel spending in Greece by non-residents declined by 18.6%, while travel spending abroad by residents fell by 32.9%; as a result, net receipts fell by €105 million. In the same month, non-residents’ arrivals decreased by 8.3%, according to data from the Bank of Greece’s border survey. Gross transport receipts (chiefly from merchant shipping) fell by 7.1%, while the corresponding payments rose by 2.9%, resulting in a decline of €97 million in net receipts.

The income account showed a deficit of €110 million, compared with a deficit of €559 million in October 2011, on account of a €445 million decrease in net payments fro interest, dividends and profits, which, in turn, mainly reflects a decline, following the PSI, in net interest payments on Greek government bonds held by non-residents.

Finally, the current transfers balance showed a deficit of €89 million, compared with a deficit of €175 million in October 2011, reflecting, on the one hand, lower net general government transfer payments (chiefly to the EU) year-on-year, and, on the other hand, the fact that the “other sectors” balance (mainly emigrants’ remittances) posted net transfer receipts, against a deficit in October 2011. (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 January-October 2012 period, the current account deficit contracted by €12.1 billion or 74.4% year-on-year, to €4.1 billion. This development primarily reflects a substantial decline of €5.8 billion in the trade deficit and a €4.9 billion decrease in the income account deficit, as well as increases of €1 billion and €344 million in the surpluses of the current transfers balance and the services balance respectively.

In more detail, the trade deficit decreased as a result of a €3.4 billion (or 32.1%) decline in the trade deficit excluding oil and ships, a €2.1 billion drop in net payments for purchases of ships and a fall in the net oil import bill fell by €320 million or 3.4%. Receipts from exports of goods excluding oil and ships rose by 2.7%, while the corresponding import bill fell at a much faster pace (14.4%).

The increase observed in the surplus of the services balance in the January-October 2012 period is primarily due to higher net transport receipts and, secondarily, lower net payments for “other” services, while net travel receipts declined slightly. In more detail, travel spending in Greece by non-residents fell by 4.0% year-on-year, whereas non-residents’ arrivals decreased at an average annual rate of 5.5% (according to data from the Bank of Greece’s border survey). At the same time, travel spending abroad by residents fell by 18.9%; as a result, net receipts declined by €38 million. Over the same period, gross transport receipts (chiefly from merchant shipping) decreased by 3.8%, but the corresponding payments fell even more (by 13.0%); as a result, net receipts rose by €348 million.

The income account deficit fell by €4.9 billion year-on-year, mainly owing to a sharp decline in net interest payments on Greek government bonds held by non-residents. This decline is a result of the PSI and the deferred interest payments on loans under the support mechanism through the ECB owing to interest rate changes, as already mentioned in the June 2012 press release.

Finally, the current transfers balance showed a surplus of €1.5 billion, up by €1 billion year-on-year. This development is mainly due to a €767 million rise in the net current transfer receipts of general government (mainly from the EU) and to the fact that the “other sectors” balance (mainly emigrants’ remittances) recorded net transfer receipts of €16 million, against net transfer payments of €236 million in the corresponding period of 2011.

Capital transfers balance

In October 2012, the deficit of the capital transfers balance shrank to €5.7 million, compared with €8.7 million in October 2011, mainly reflecting a narrowing of the deficit in the “other sectors” balance (excluding general government), while net EU capital transfers to general government were almost zero. (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 2012 period, the capital transfers balance showed a surplus of €1.6 billion, compared with €1.1 billion in the corresponding period of 2011. This increase stems exclusively from a rise in net EU capital transfers to general government.

The overall transfers balance (current transfers plus capital transfers) recorded a surplus of €3.1 billion in the period under review, up by €1.45 billion year-on-year, reflecting the above-mentioned positive development in EU capital transfers.

Combined current account and capital transfers balance

The combined current account and capital transfers balance (corresponding to the economy’s external financing requirements) showed a deficit of €690 million in October 2012, compared with €1.5 billion in October 2011. In the January-October 2012 period, this balance showed a deficit of just €2.6 billion, compared with €15.1 billion in the corresponding period of 2011 (down by 82.9%), i.e. it fell at a faster pace than the current account deficit.

Financial account balance

In October 2012, non-residents’ direct investment in Greece showed a net outflow (decline) of €31 million. The most significant transaction concerns an inflow of €134 million for the participation of parent company Allianz S.E. (Germany) in the share capital increase of its subsidiary Allianz Hellas, which, however, was more than offset by negative reinvested earnings (i.e. losses instead of profits on the balance sheets of corporate direct investors in Greece). Residents’ direct investment abroad recorded a net inflow of €79 million (disinvestment). The most important transaction concerned a €100 million inflow from the sale of Piraeus Bank’s stake in Marathon Banking Corporation (USA) to Investors Bancorp Inc.

Under portfolio investment, a net outflow of €1.6 billion was recorded, mainly reflecting a €1.3 billion rise in residents’ investment in foreign bonds and Treasury bills. At the same time, a capital outflow of €250 million was observed, which was chiefly attributable to a decrease in non-residents’ holdings of Greek bonds and Treasury bills.

Under “other” investment, a net inflow of €1.6 billion was recorded, which was mainly accounted for by a decline of €1.7 billion in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (inflow), as well as a net increase of €923 million in non-residents’ deposit and repo holdings in Greece (inflow). These developments were partly offset by a €901 million outflow relating to Greece’s participation in the initial capital of the European support mechanism, as well as a net decline of €165 million (repayment) of the outstanding debt of the public and the private sector to non-residents (outflow).

In the January-October 2012 period, direct investment showed a net inflow of €2.1 billion (against an equal net outflow in the corresponding period of 2011). Specifically, non-residents’ direct investment in Greece posted a net inflow of €1.8 billion, while residents’ direct investment abroad showed a net inflow of €264 million (disinvestment).

A net outflow of €77.6 billion was observed under portfolio investment (compared with a net outflow of €18.1 billion in the corresponding period of 2011). In more detail, a capital outflow was recorded, on the one hand owing to a €40.1 billion increase in residents’ holdings of foreign bonds and Treasury bills (including EFSF bonds) and, on the other hand, a €36.5 billion decrease in non-residents’ holdings of Greek bonds and Treasury bills. Furthermore, a capital outflow was recorded also on account of increases of €738 million and €128 million in residents’ holdings of foreign financial derivatives and foreign shares, respectively. Finally, a €137 million outflow was attributable to a decline in non-residents’ investment in shares of Greek firms.

Under “other” investment, a net inflow of €79.0 billion was recorded (compared with a net inflow of €36.2 billion in the corresponding period of 2011). This is chiefly attributable to a €75.9 billion increase in the net outstanding debt of the public and the private sector to non-residents (inflow) and to a €15.4 billion decline in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (inflow). In more detail, net general government borrowing came to €75.1 billion and reflects gross public sector borrowing of €75.6 billion from the EFSF and the IMF. These developments were partly offset by a €10.9 billion decline in non-residents’ holdings of deposits and repos in Greece (outflow).

At end-October 2012, Greece’s reserve assets stood at €5.9 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. Excluded are euro-denominated claims on non-euro area residents, claims (in foreign currency and in euro) on euro area residents, and the Bank of Greece share in the capital and reserves of the ECB.)

Note: Balance of payments data for November 2012 will be released on 25 January 2013.

Related link: Balance of payments: October 2012 - Table

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