Press Releases

Balance of Payments: JULY 2009

18/09/2009 - Press Releases

Current account balance

In July 2009, the current account deficit dropped by €537 million year-on-year to €1,875 million, reflecting mainly a large contraction of the trade deficit and, secondarily, a decrease in the income account deficit and a rise in the surplus of the current transfers balance. At the same time, however, the surplus of the services balance narrowed.

The €1,125 million fall in the overall trade deficit stemmed from declines of €588 million, €514 million and €23 million in the trade deficit excluding oil and ships (as the drop in the import bill was, in absolute terms, more than double the decrease in export receipts), the net oil import bill and net payments for purchases of ships, respectively.

The surplus of the services balance shrank by €953 million, mainly owing to a fall in net transport and travel receipts (of €503 million and €404 million, respectively). Specifically, non-residents’ travel spending in Greece dropped by 16.7% year-on-year, while residents’ travel spending abroad rose by 9.3%. Transport (mainly shipping) receipts fell substantially (by 38.1%). The income account deficit decreased by €321 million, mainly owing to lower net interest, dividend and profit payments. Finally, the current transfers balance showed a surplus of €96 million (up by €44 million year-on-year), mainly because net general government receipts from the EU grew. (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-July 2009, the current account deficit narrowed by €4,944 million or 22.9% year-on-year and came to €16,614 million, reflecting mainly a large decrease in the trade deficit. At the same time, however, the surpluses of the services balance and the current transfers balance shrank considerably. The income account deficit showed a small decline.

The €8,539 million drop in the overall trade deficit is attributable to decreases of €4,938 million, €2,869 million and €732 million 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 €6,284 million or 25.5%, i.e. much more than export receipts, which declined by €1,346 million or 17.0%.

The €2,987 million contraction in the surplus of the services balance mainly reflects lower net transport and travel receipts. It should be noted that gross transport receipts (chiefly from merchant shipping) fell considerably (by 30.1%); as a result, net transport receipts dropped by €1,983 million. Moreover, travel spending in Greece by non-residents decreased by 15.5%, while travel spending abroad by residents declined by 3.3%; as a result, net travel receipts fell by €867 million. Finally, payments for “other” services grew by €137 million.

The income account deficit dropped by €278 million in comparison with the corresponding period of 2008, because net interest, dividend and profit payments showed a decrease, as a result of international money market developments. Finally, the surplus of the current transfers balance showed a decline of €886 million due to, mainly, lower EU transfers to general government and, secondarily, higher government payments to the EU.

Capital transfers balance

In July 2009, the capital transfers balance showed a surplus of €355 million, slightly down 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.)

In January-July 2009, the capital transfers balance showed a surplus of €1,256 million, compared with €2,585 million in the same period of 2008. This mainly reflects a decline in EU capital transfers to general government. Thus, the overall transfers balance (current transfers plus capital transfers) recorded a surplus of €2,805 million, compared with €5,020 million 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 €1,520 million in July 2009, compared with €2,011 million in July 2008. In the January-July 2009 period, this deficit reached €15,358 million, compared with €18,973 million in the same period of 2008, i.e. it dropped by 19.1%.

Financial account balance

In July 2009, non-residents’ direct investment in Greece recorded a net inflow of €709 million. The most important transaction in this category concerned a €673 million inflow for the increase in the participation of DEUTSCHE TELEKOM AG in the share capital of the Hellenic Telecommunications Organisation (OTE) from 25% to 30%. In the same month, residents’ direct investment abroad showed a net outflow of €95 million. The most important transaction in this category concerned, on the one hand, a €20 million outflow for the participation of Jumbo S.A. in the capital increase of its subsidiary Jumbo ECB (Bulgaria) and, on the other hand, a €10 million outflow for the participation of EUROBANK in the capital increase of its subsidiary Bank Post S.A. (Romania).

Under portfolio investment, a net inflow of €4.8 billion was recorded, mainly reflecting a €5.5 billion increase (inflow) in non-residents’ investment in Greek bonds and Treasury bills, which was offset to a very small extent by a €0.3 billion rise (outflow) in residents’ purchases of foreign bonds and Treasury bills and a €0.5 billion rise (outflow) in residents’ investment in shares of foreign firms.

Under “other” investment, an outflow of €3.7 billion was recorded, which is mainly attributable to a €3.3 billion decrease (outflow) in non-resident credit institutions’ and institutional investors’ deposit and repo holdings in Greece, while a small rise (outflow) of €0.2 billion was recorded in residents’ corresponding deposit and repo holdings abroad.

In January-July 2009, direct investment showed a net inflow of €1.8 billion. Specifically, net inflows of non-residents’ funds for direct investment in Greece came to €2,414 million, while net outflows of residents’ funds for direct investment abroad reached €600 million.

During the same period, a net inflow of €23.7 billion was observed under portfolio investment. This mainly reflects inflows due to non-residents’ purchases of Greek government bonds and Treasury bills (of €26.3 billion), while an outflow was observed due to a €1.5 billion increase in residents’ investment in foreign bonds and Treasury bills. Residents’ investment in foreign shares also showed a small rise (outflow) of €0.7 billion.

Finally, under “other” investment, a net outflow of €9.4 billion reflects a €15.7 billion increase (outflow) in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad, which was partly offset by a €5.3 billion rise (inflow) in non-resident credit institutions’ and institutional investors’ corresponding holdings in Greece, as well as a €1.1 billion inflow for loans granted by non-residents to both the public and the private sector.

At end-July 2009, Greece’s reserve assets stood at €2.7 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. 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 August 2009 will be released on 19 October 2009.

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