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Balance of payments: August 2010

20/10/2010 - Press Releases

Current account balance

In August 2010, the current account deficit reached €259 million, down by 44.5% or €208 million year-on-year. This improvement is mainly attributable to a decrease in the trade deficit and, secondarily, a small rise in the surplus of the services balance, as well as a small drop in the income account deficit. These developments were partly offset by an increase in the deficit of the current transfers balance.

The narrowing of the trade deficit was accounted for by decreases of €179.3 million and €96 million in the trade deficit excluding oil and ships and in the net oil import bill, respectively, while net payments for imports of ships rose slightly by €27 million. Specifically, exports of goods excluding oil and ships grew, as in July, albeit marginally (by 0.3%) year-on-year, after showing a negative annual rate of change up to June. Imports of goods excluding oil and ships decreased by 8.2% year-on-year.

The surplus of the services balance showed a small rise of €41 million as a result of a €69 million increase in net transport receipts and a €47 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 travel receipts declined by 6.3% year-on-year, after falling by 4.7% in July and 12.1% in June (also year-on-year). Travel payments dropped appreciably (by 25.4%). Transport receipts (mainly from merchant shipping) continued to grow strongly in August (by 18.5%).

The income account deficit shrank by €11 million, due to lower net interest, dividend and profit payments.
Finally, the deficit of the current transfers balance grew by €93 million year-on-year, chiefly as a result of higher general government transfer payments (mainly to the EU) and, secondarily, a small increase in net transfer payments by the other sectors (mainly emigrants’ remittances). (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 2010 period, the current account deficit fell by 2.1% or €342 million year-on-year. Specifically, this deficit had grown by 0.4% on average, year-on-year, in the first half of 2010, before falling by 11.6% in July and 44.5% in August (as already mentioned). This development over the first eight months of 2009 reflects mainly a fall in the trade deficit and a rise in the surplus of the services balance and, secondarily, a small decline in the income account deficit. By contrast, the surplus of the current transfers balance narrowed visibly.

The €606 million drop in the overall trade deficit stemmed from a decrease of €1,728 million in the trade deficit excluding oil and ships. Specifically, the relevant import bill fell by €1,998 million (9.7%), while the corresponding export receipts declined by €270 million (3.6%). By contrast, the net oil import bill rose by €1,060 million or 20.7%, while net payments for purchases of ships grew marginally by €62 million or 2.5%.

The €268 million increase in the surplus of the services balance mainly reflects higher net transport receipts. Gross transport receipts (chiefly from merchant shipping) showed an increase of 15.2% and – despite a 19.5% rise in the corresponding payments – net transport receipts rose by €479 million. By contrast, net travel receipts fell by €409 million, as travel spending in Greece by non-residents dropped by €554 million or 7.3%, while travel spending abroad by residents declined by €144 million or 8.8%. Finally, net payments for “other” services decreased by €198 million.

The income account deficit narrowed slightly (by €52 million) in comparison with the corresponding period of 2009, reflecting lower net interest, dividend and profit payments.

Finally, the surplus of the current transfers balance fell by €584 million year-on-year. This decline mainly reflects the fact that the “other sectors” showed net transfer payments of €31 million, against net receipts of €364 million in the corresponding period in 2009. Moreover, net EU transfers to general government decreased by €189 million.

Capital transfers balance

In August 2010, the capital transfers balance showed a deficit of €13 million, compared with a surplus of €278 million in August 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-August 2010 period, the capital transfers balance showed a surplus of €787 million, compared with €1,534 million in the same 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 €1,709 million, compared with a surplus of €3,039 million in the same period of 2009.

Combined current account and capital transfers balance

In August 2010, the combined current account and capital transfers balance (corresponding to the economy’s external financing requirements) showed a deficit of €272 million, compared with a deficit of €189 million in August 2009. In the January-August 2010 period, the deficit of the combined current account and capital transfers balance came to €15.0 billion, compared with €14.6 billion in the corresponding period of 2009 (up by 2.8%).

Financial account balance

In August 2010, residents’ direct investment abroad by residents came to €142 million (a net outflow). The most important transactions concerned: (a) a €44 million outflow for the acquisition by the National Bank of Greece of shares of Finans Leasing (Turkey) and (b) a €35 million outflow for the acquisition, also by the National Bank of Greece, of shares of Stopanska Banka AD (FYROM). Besides, non-residents’ direct investment in Greece showed a net outflow of €47 million, but no important transactions were recorded.

Under portfolio investment, a net outflow of €11.9 billion was recorded, reflecting mainly a €12.2 billion decrease (outflow) in non-residents’ investment in bonds and Treasury bills. The decreases of €0.2 billion and €0.3 billion in residents’ holdings of foreign bonds/Treasury bills and foreign derivatives respectively, which constitute an inflow, were too small to offset the above development.

Under “other” investment, a net inflow of €12.9 billion was recorded, which mainly reflects a €11.8 billion decline in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (an inflow), as well as a €1.2 billion increase in non-residents’ deposit and repo holdings in Greece (also an inflow).

In the January-August 2010 period, direct investment showed a net inflow of €489 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 €18.1 billion was observed under portfolio investment (against a net inflow of €21.1 billion in the corresponding period of 2009). Specifically, outflows were recorded due to decreases of €26.5 billion in non-residents’ purchases of bonds and Treasury bills and of €1.2 billion in non-residents’ purchases of shares of Greek firms. 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 a €10.4 billion inflow owing to a decline in resident credit institutions’ and institutional investors’ holdings of foreign bonds and Treasury bills.

Under “other” investment, a net inflow of €33.9 billion (against a net outflow of €6.8 billion in the same period of 2009) is mainly attributable to general government net borrowing of €18.5 billion, as well as a €18.8 billion increase (inflow) in non-residents’ deposit and repo holdings in Greece. These developments were partly offset by a €4.2 billion rise (outflow) in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad.

At end-August 2010, Greece’s reserve assets stood at €4.6 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.)

Balance of payments: August 2010

Note: Balance of payments data for September 2010 will be released on 19 November 2010.  

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