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Balance of payments: August 2011

20/10/2011 - Press Releases

Current account balance

In August 2011, the current account balance showed a deficit of €145 million, down by €54 million year-on-year.

The trade deficit rose by €140 million owing to increases of 32.5% and 41.5% in the net import bill for oil and net payments for ships, respectively. By contrast, the trade balance excluding oil and ships improved considerably. More specifically, receipts from exports of goods excluding oil and ships increased by €273 million or 30.3%, but the corresponding import bill rose by €84 million or 4.2%.

The surplus of the services balance grew by €246 million because net travel and transport receipts rose and the “other” services balance shifted from a deficit in August 2010 to a surplus in August 2011. In more detail, travel spending by non-residents in Greece grew by 6.5% in August (slightly more than arrivals, which increased by 6.2% year-on-year). Gross transport receipts (chiefly from merchant shipping) fell by 4.3%, but the corresponding payments also decreased, by 12%; as a result, net receipts grew by 4.0%.

The income account deficit rose by €56 million, mainly as a result of higher net payments for interest, dividends and profits.

Finally, the current transfers balance showed almost the same deficit as in August 2010. (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-August 2011 period, the current account deficit fell by €1.25 billion or 8.3% year-on-year, to €13.9 billion. This chiefly reflects a substantial decrease of €2.5 billion in the non-oil trade deficit and a rise of €534 million in the surplus of the services balance, which more than offset a large increase in the net oil import bill and a widening of the income account deficit. The current transfers balance did not show any remarkable change.

In more detail, the overall trade deficit shrank by €1.05 billion, as a result of a €2.4 billion decrease in the trade deficit excluding oil and ships and a €107 million fall in net payments for purchases of ships. By contrast, the net oil import bill rose by €1.4 billion. Most importantly, receipts from exports of goods excluding oil and ships rose by 17.4%, while the corresponding import bill declined by 6.1%.

A €534 million increase in the surplus of the services balance reflects higher net travel receipts and lower net payments for “other” services, which more than offset a contraction in net transport receipts. More specifically, travel spending by non-residents in Greece grew markedly (by 10.0%) year-on-year, while travel spending by residents abroad rose by 6.8%. According to data from the Bank of Greece’s border survey, in the January-August 2011 period non-residents’ arrivals rose at an average annual rate of 9.9%. During the same period, gross transport receipts (chiefly from merchant shipping) fell by 10.9% and the corresponding payments decreased by 9.6%; as a result, net receipts shrank by €609 million.

The income account deficit rose by €330 million year-on-year, mainly due to higher net payments for interest, dividends and profits (up by 5.1%).

Finally, the current transfers balance showed a surplus of €883 million, almost unchanged year-on-year (€886 million in January-August 2010). This development is due to the fact that net transfer receipts of general government (mainly from the EU) rose by €90 million and marginally offset a €93 million increase in the net transfer payments of other – than general government – sectors (which chiefly concern emigrants’ remittances). As regards general government receipts, it should be noted that the bulk of the funds allocated to general government under EU current transfers for the whole of 2011, concerning direct aid and subsidies under the Common Agricultural Policy, has already flowed in during the first two months of 2011.

Capital transfers balance

In August 2011, the capital transfers balance showed a surplus of €580 million, compared with a very small deficit in August 2010. (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-August 2011 period, the capital transfers balance showed a surplus of €1,144 million, compared with €787 million in the corresponding period of 2010. This mainly reflects an increase in net EU capital transfers to general government. The overall transfers balance (current transfers plus capital transfers) recorded a surplus of €2.0 billion, up by €354 million year-on-year, reflecting the above-mentioned positive development in capital transfers from the EU.

Combined current account and capital transfers balance

In August 2011, the combined current account and capital transfers balance (corresponding to the economy’s external financing requirements) showed a surplus of €435 million, compared with a deficit of €212 million in August 2010. In the January-August 2011 period, this balance showed a deficit of €12.8 billion, compared with €14.4 billion in the corresponding period of 2010 (down by 11.2%).

Financial account balance

In August 2011, non-residents’ direct investment in Greece showed a net outflow (disinvestment) of €91 million, without any remarkable transactions. Residents’ direct investment abroad recorded a net outflow of €29 million, also without any remarkable transactions.

Under portfolio investment, a net outflow of €1.9 billion was recorded, reflecting a €5.9 billion decrease in non-residents’ holdings of Greek government bonds and Treasury bills (outflow). This was partly offset by a €4.1 billion drop in residents’ holdings of foreign bonds and Treasury bills (inflow).

Under “other” investment, a net inflow of €2.0 billion was recorded, which mainly reflects a €1.5 billion decrease in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad and a €603 million net increase in non-residents’ deposit and repo holdings in Greece (inflow). By contrast, a small net decline of €142 million was recorded in the outstanding debt of the public and the private sector to non-residents (outflow).

In the January-August 2011 period, direct investment showed a net outflow of €1.4 billion (compared with a net outflow of €269 million in the corresponding period of 2010). Specifically, net outflows of residents’ funds for direct investment abroad reached €1.2 billion, while non-residents’ investment in Greece showed a net outflow (disinvestment) of €218 million.

A net outflow of €11.3 billion was observed under portfolio investment (compared with a net outflow of €18.1 billion in the corresponding period of 2010). In more detail, an outflow was recorded due to, mainly, a decrease of €20.6 billion in non-residents’ holdings of Greek government bonds and Treasury bills and, secondarily, a €631 million increase in residents’ investment in foreign derivatives and a €164 million decline in non-residents’ holdings of shares of Greek firms. These developments were only partly offset by a €10.0 billion decline in resident institutional investors’ holdings of foreign bonds and Treasury bills and a €94 million decrease in residents’ holdings of shares of foreign firms.

Under “other” investment, a net inflow of €26.5 billion (compared with a net inflow of €34.0 billion in the corresponding period of 2010) is mainly attributable to a €31.5 billion increase in the net outstanding debt of the public and the private sector to non-residents. In particular, net general government borrowing came to €32.1 billion and gross general government borrowing under the support mechanism for the Greek economy came to €33.4 billion. This development was partly offset by a €1.9 billion rise in residents’ deposit and repo holdings abroad and a €2.8 billion decrease in non-residents’ deposit and repo holdings in Greece (outflow).

At end-August 2011, Greece’s reserve assets stood at €4.7 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. 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 September 2011 will be released on 22 November 2011.

Related link: Balance of payments: August 2011 - Table

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