Press Releases

Balance of payments: October 2010

21/12/2010 - Press Releases

Current account balance

In October 2010, the current account deficit came to €2,350 million, down by €41 million or 1.7% year-on-year. This improvement is attributable to, mainly, a decrease in the trade deficit; secondarily, a rise in the surplus of the services balance; and, marginally, a drop in the income account deficit. These developments more than offset the large increase in the deficit of the current transfers balance.

The drop in the trade deficit was accounted for by a decrease of €351 million in the trade deficit excluding oil and ships, while the net import bill for oil and ships rose by €77 million and €102 million, respectively. Specifically, exports of goods excluding oil and ships fell marginally (by 0.3%) year-on-year, probably affected with a lag by the recording, at the transactions level, of the negative impact from the strike of truck owners in September. It should be noted that exports of goods excluding oil and ships had shown a negative annual rate of change up to June, before turning marginally positive in the next two months and rising visibly in September. The import bill for goods excluding oil and ships dropped by 14.2% year-on-year in October.

The surplus of the services balance rose by €65 million as a result of a €124 million increase in net transport receipts. By contrast, net travel receipts fell by €50 million year-on-year and net payments for “other” services rose by €9 million. It should be noted that travel receipts declined by 4.9% year-on-year, while travel payments rose by 6.1%. By contrast, transport receipts (mainly from merchant shipping) continued to grow strongly in October (by 14.6%).

The income account deficit narrowed marginally by €8 million, mainly due to marginally lower net interest, dividend and profit payments.

Finally, the deficit of the current transfers balance almost doubled, as it grew by €203 million year-on-year. This was chiefly the result of higher general government transfer payments to the EU, which included the contribution to the JESSICA Fund (Joint European Support for Sustainable Investment in City Areas), of €258 million. This Fund is a financing mechanism operating under the rules of the National Strategic Reference Framework. (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 2010 period, the current account deficit fell by €552 million or 2.8% year-on-year. A decrease, on an annual basis, was first observed in July 2010. Specifically, this deficit had grown by 0.4% on an average annual basis in the first half of 2009, before falling by 11.6% in July, 44.5% in August and 11.4% in September year-on-year. This development during the first ten months of 2010 reflects mainly a decrease 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 to one fourth, while the income account deficit rose marginally.

The €1,095 million drop in the overall trade deficit mainly stemmed from a decrease of €2.8 billion in the trade deficit excluding oil and ships. Specifically, the import bill for goods excluding oil and ships fell by €3.0 billion or 11.7%, while the corresponding export receipts declined by €212 million or 2.2%. By contrast, the net oil import bill rose by €1.4 billion or 21.9%, while net payments for purchases of ships grew by €312 million or 11.4%.

The €440 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 15.5% and – despite a 17.1% rise in the corresponding payments – net transport receipts grew by €745 million. By contrast, net travel receipts fell by €534 million, as travel spending in Greece by non-residents dropped by €674 million or 6.7%, while travel spending abroad by residents of Greece declined by €140 million or 6.9%. Finally, net payments for “other” services decreased by €230 million.

The income account deficit widened marginally (by €29 million or 0.4%) in comparison with the corresponding period of 2009, reflecting higher net payments for compensation of employees, while net interest, dividend and profit payments declined marginally.

Finally, the surplus of the current transfers balance fell by €955 million year-on-year. This decline mainly reflects the fact that the “other sectors” (emigrants’ remittances etc.) showed net transfer payments of €22 million, against net receipts of €408 million in the corresponding period in 2009, while general government net receipts (mainly from the EU) fell by €524 million (about 2/5 of this decrease was attributable to lower receipts and 3/5 to higher payments).

Capital transfers balance

In October 2010, the capital transfers balance showed a deficit of €18 million, compared with a surplus of €14 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-October 2010 period, the capital transfers balance showed a surplus of €751 million, compared with €1.5 billion in the corresponding period of 2009. This mostly reflects a decline in EU capital transfers to general government. The overall transfers balance (current transfers plus capital transfers) recorded a surplus of €1.1 billion, compared with a surplus of €2.8 billion in the corresponding period of 2009.

Combined current account and capital transfers balance

In October 2010, the combined current account and capital transfers balance (corresponding to the economy’s external financing requirements) showed a deficit of €2.4 billion, almost the same as in October 2009. In the January-October 2010 period, the deficit of the combined current account and capital transfers balance came to €18.7 billion, compared with €18.5 billion in the corresponding period of 2009 (up by 1.3%).

Financial account balance

In October 2010, non-residents’ direct investment in Greece showed a net inflow of €84 million (without any remarkable transactions). Residents’ direct investment abroad showed a net outflow of €34 million; the most important transaction in this category concerned an inflow (disinvestment) of €24 million from the sale of the participation of “Nireus Fisheries and Aquaculture Consultants SA” in the Norwegian company “Marine Farms ASA”.

Under portfolio investment, a net outflow of €2.3 billion was recorded, reflecting mainly a €3.0 decrease in non-residents’ investment in Greek government bonds and Treasury bills. This development more than offset a €0.5 billion drop in residents’ investment in foreign bonds and Treasury bills (inflow) and a €0.1 billion increase in non-residents’ investment in shares of Greek firms (inflow).

Under “other” investment, a net inflow of €4.7 billion was recorded, which mainly reflects a €5.0 billion decrease in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (inflow), as well as a €38 million increase in residents’ outstanding debt obligations to non-residents (inflow). These developments were partly offset by a €366 million decrease (outflow) in non-residents’ deposit and repo holdings in Greece.

In the January-October 2010 period, direct investment showed a net inflow of €454 million. Specifically, net inflows of non-residents’ funds for direct investment in Greece reached €1.2 billion (compared with a net inflow of €1.8 billion in the corresponding period of 2009), while an outflow of €0.8 billion was recorded under residents’ direct investment abroad.

During the same period, a net outflow of €20.6 billion was observed under portfolio investment (against a net inflow of €24.3 billion in the corresponding period of 2009). Specifically, outflows were recorded due to decreases of €32.2 billion and €1.2 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 partly offset by inflows of €13.6 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 €39.6 billion (against a net outflow of €6.0 billion in the corresponding period of 2009) is mainly attributable to general government net borrowing of €27.6 billion, as well as a €12.6 billion increase in non-residents’ deposit and repo holdings in Greece (inflow). These developments were partly offset by a €1.6 billion rise in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (outflow).

At end-October 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 November 2010 will be released on 20 January 2011.

Balance of payments: October 2010 - Table

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