Balance of payments: September 2010
19/11/2010 - Press Releases
Current account balance
In September 2010, the current account deficit reached €1,311 million, down by €169 million or 11.4% year-on-year. This improvement is mainly attributable to a decrease in the trade deficit and, secondarily, a rise in the surplus of the services balance. These developments were partly offset by increases in the current transfers and income account deficits.
The decline in the trade deficit was accounted for by a decrease of €734 million in the trade deficit excluding oil and ships, while the net import bill for oil and ships rose by €270 million and €147 million, respectively. Specifically, exports of goods excluding oil and ships grew by 6.2% year-on-year, after rising only marginally on an annual basis in July and August and showing a negative annual rate of change up to June. Imports of goods excluding oil and ships decreased by 23.3% year-on-year.
The surplus of the services balance rose by €108 million as a result of a €142 million increase in net transport receipts and a €41 million decrease in net payments for “other” services. By contrast, net travel receipts fell by €75 million year-on-year. It should be noted that both travel receipts and payments declined by 5.1% and 4.1% year-on-year, respectively. By contrast, transport receipts (mainly from merchant shipping) continued to grow strongly in September (by 18.6% year-on-year).
The income account deficit widened by €88 million, due to higher net interest, dividend and profit payments.
Finally, the deficit of the current transfers balance grew by €168 million year-on-year as a result of lower general government transfer receipts (mainly from the EU) and, secondarily, higher transfer payments by the same sector to the EU. (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-September 2010 period, the current account deficit fell by 2.9% or €511 million year-on-year. A year-on-year decrease was first observed in July 2010. Specifically, this deficit had grown by 0.4% year-on-year in the first half of 2010, before decreasing by 11.6% in July, 44.5% in August and 11.4% in September year-on-year. This development during the first nine months of 2010 reflects mainly a fall in the trade deficit and a rise in the surplus of the services balance. By contrast, during the same period, the surplus of the current transfers balance narrowed visibly, while the income account deficit rose marginally.
The €923 million drop in the overall trade deficit mainly stemmed from a decrease of €2.5 billion in the trade deficit excluding oil and ships. Specifically, the import bill for goods excluding oil and ships fell by €2.7 billion (11.4%), while the corresponding export receipts declined by €209 million (2.5%). By contrast, the net oil import bill rose by €1.3 billion or 23.2%, while net payments for purchases of ships grew by €209 million or 8.2%.
The €376 million increase in the surplus of the services balance mainly reflects higher net transport receipts and, secondarily, lower net payments for other services. Gross transport receipts (chiefly from merchant shipping) showed an increase of 15.6% and – despite an 18.4% rise in the corresponding payments – net transport receipts grew by €621 million. By contrast, net travel receipts fell by €484 million, as travel spending by non-residents in Greece dropped by €636 million or 6.9%, while travel spending by residents abroad declined by €152 million or 8.3%. Finally, net payments for “other” services decreased by €239 million.
The income account deficit widened marginally (by €36 million or 0.5%) in comparison with the corresponding period of 2009, reflecting higher net payments for compensation of employees, while net interest, dividend and profit payments remained virtually unchanged.
Finally, the surplus of the current transfers balance fell by €752 million year-on-year. This decline mainly reflects the fact that the “other sectors” (emigrants’ remittances) showed net transfer payments of €27 million, against net receipts of €373 million in the same period in 2009, while general government net receipts (mainly from the EU) dropped by €352 million (3/5 of this decrease was attributable to lower receipts and 2/5 to higher payments).
Capital transfers balance
In September 2010, the capital transfers balance showed a deficit of €18 million, compared with €13 million in September 2009. (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-September 2010 period, the capital transfers balance showed a surplus of €769 million, compared with €1.5 billion in the corresponding period of 2009. This reflects almost exclusively a decline in EU capital transfers to general government. The overall transfers balance (current transfers plus capital transfers) recorded a surplus of €1.5 billion, compared with a surplus of €3.0 billion in the corresponding period of 2009.
Combined current account and capital transfers balance
In September 2010, the combined current account and capital transfers balance (corresponding to the economy’s external financing requirements) showed a deficit of €1.3 billion, compared with a deficit of €1.5 billion in September 2009. In the January-September 2010 period, the deficit of the combined current account and capital transfers balance came to €16.3 billion, compared with €16.1 billion in the corresponding period of 2009 (up by 1.5%).
Financial account balance
In September 2010, residents’ direct investment abroad showed a net outflow of €82 million. The most important transaction concerned a €36 million outflow for the participation of Lamda Development Holdings and Property Development SA in the capital increase of its subsidiary Lamda Development (Netherlands). Non-residents’ direct investment in Greece showed a net outflow of just €3 million, without any important transactions.
Under portfolio investment, a net outflow of €187 million was recorded, reflecting mainly decreases of €2.7 billion and €133 million in non-residents’ holdings of Greek government bonds/Treasury bills and shares of Greek firms, respectively (outflow). These developments more than offset a €2.6 billion decrease in residents’ holdings of foreign bonds and Treasury bills (inflow).
Under “other” investment, a net inflow of €936 million was recorded, which mainly reflects public sector net borrowing of €9.05 billion under the support mechanism for the Greek economy, as well as a decline in the outstanding balance of loans granted to non-residents (inflow of €239 million). These developments were largely offset by a €5.9 billion decrease in non-residents’ deposit and repo holdings in Greece (outflow) and a €2.4 billion increase in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (outflow).
In the January-September 2010 period, direct investment showed a net inflow of €404 million. Specifically, net inflows of non-residents’ funds for direct investment in Greece reached €1.1 billion (compared with a net inflow of €1.8 billion in the corresponding period of 2009), while an outflow of €0.7 billion was recorded under residents’ direct investment abroad.
During the same period, a net outflow of €18.3 billion was observed under portfolio investment (against a net inflow of €23.4 billion in the corresponding period of 2009). Specifically, outflows were recorded due to decreases of €29.2 billion and €1.3 billion in non-residents’ purchases of Greek bonds/Treasury bills and shares of Greek firms, respectively. There was also a €1.2 billion outflow due to a rise in residents’ holdings of foreign shares. These outflows were only partly offset by inflows of €13.1 billion and €0.4 billion owing to declines in resident credit institutions’ and institutional investors’ holdings of foreign bonds and financial derivatives, respectively.
Under “other” investment, a net inflow of €34.9 billion (against a net outflow of €7.5 billion in the corresponding period of 2009) is mainly attributable to general government net borrowing of €27.6 billion, as well as a €12.9 billion increase in non-residents’ deposit and repo holdings in Greece (inflow). These developments were partly offset by a €6.6 billion rise (outflow) in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad.
At end-September 2010, Greece’s reserve assets stood at €4.4 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 October 2010 will be released on 21 December 2010.
Balance of payments: September 2010 - Table