Press Releases

Balance of Payments: JUNE 2008

19/08/2008 - Press Releases

Current account balance

In June 2008, the current account deficit grew by €471 million year-on-year, to reach €2,958 million, as a result of the expansion of the trade deficit. By contrast, the income account deficit shrank and the surpluses of the services balance and the current transfers balance rose.

The year-on-year rise of €852 million in the overall trade deficit is attributable mainly to an increase of €526 million in the trade deficit excluding oil and ships and, secondarily, το a €329 million rise in the net oil import bill, while net payments for purchases of ships remained almost unchanged.

As a result of increases in net travel and transport receipts (up €128 million and €121 million respectively), the surplus of the services balance grew by €200 million. Net payments for other services rose by €50 million.

The €170 million decline in the income account deficit is attributable to a drop in net dividend and profit payments, which was only partly offset by an increase in net interest payments.

The surplus of the current transfers balance rose slightly by €12 million year-on-year, as the net receipts of the other sectors (excluding general government) grew by €35 million, while net EU transfers to general government dropped by €23 million. (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 the first half of 2008, the current account deficit rose by €2,378 million over the corresponding period of 2007 and reached €19,136 million. This development reflects increases mainly in the trade deficit and, secondarily, in the income account deficit, which were only partly offset by a rise in the surpluses of the current transfers balance and the services balance.

The €3,746 million rise in the overall trade deficit is attributable to increases of €1,945 million, €1,517 million and €284 million in the net oil import bill, the trade deficit excluding oil and ships, and net payments for purchases of ships, respectively. Regarding in particular the trade balance excluding oil and ships, export receipts grew by €590 million or 9.9%, while the corresponding import bill rose by €2,108 million or 11.3%.

The surplus of the services balance expanded by €528 million, largely reflecting higher net transport receipts (up €674 million). It should be noted that gross transport receipts (mainly from merchant shipping) increased by 22.3%. Net travel receipts rose by €134 million year-on-year, as gross receipts (i.e. travel spending in Greece by non-residents) grew by €278 million (or 8.3%), while gross payments (i.e. travel spending abroad by residents of Greece) increased by €143 million (or 12.6%). Net payments for other services rose by €281 million.

The income account deficit expanded by €584 million, exclusively as a result of higher net interest, dividend and profit payments. This development is largely associated with a rise in non-residents' holdings of Greek public debt.

Finally, the large increase of €1,425 million in the surplus of the current transfers balance is attributable mainly to a substantial rise in EU transfers to general government and, secondarily, to a decline in general government payments to the EU.

Capital transfers balance

In June 2008, the capital transfers balance showed a surplus of €76 million, compared with €61 million in June 2007. (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-June 2008 period, the capital transfers balance showed a surplus of €2,184 million (down €153 million year-on-year). This mainly reflects a rise in general government payments to the EU, while EU capital transfers to general government dropped only by €20 million. The overall transfers balance (current transfers plus capital transfers), however, recorded a surplus of €4,567 million, up €1,271 million in comparison with the corresponding period of 2007.

Combined current account and capital transfers balance (according to the old method of presentation)

The combined current account and capital transfers balance (according to the old method of presentation) showed a deficit of €2,882 million in June 2008, compared with a deficit of €2,426 million in the same month of 2007. In the January-June 2008 period, this deficit came to €16,952 million, compared with €14,421 million in the same period of 2007.

Financial account balance

In June 2008, residents' direct investment abroad came to €133 million, while non-residents' direct investment in Greece showed a small inflow of €12 million. Under portfolio investment, a net inflow of €1,900 million was recorded, attributable chiefly to non-residents' purchases of Greek government bonds and Treasury bills (worth €1,090 million), as well as to residents' sales of foreign bonds/Treasury bills and shares (worth €845 million and €442 million respectively). These developments were partly offset by non-residents' sales of shares of Greek firms (worth €563 million). "Other" investment recorded a net inflow of €633 million, mainly reflecting a €733 million decline in Greek credit institutions' deposit and repo holdings abroad.

In the January-June 2008 period, direct investment showed a net inflow of €1,550 million. Specifically, net inflows of non-residents' funds for direct investment in Greece came to €2,716 million, while net outflows of residents' funds for direct investment abroad reached €1,167 million. During the same period, a small net inflow of €316 million was recorded under portfolio investment. Specifically, the inflows due to non-residents' purchases of Greek government bonds and Treasury bills (of €9.7 billion) and to residents' sales of foreign shares (of €1.1 billion) offset outflows due to residents' purchases of foreign bonds and Treasury bills (worth €8.7 billion) and to non-residents' sales of shares of Greek firms (worth €1.7 billion). Finally, under "other" investment, a net inflow of €15.1 billion is attributable to the fact that the inflows of non-residents' funds for investment in deposits and repos in Greece were almost three times the increase in residents' corresponding deposits abroad.

At end-June 2008, Greece's reserve assets reached €2.4 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 July 2008 will be released on 19 September 2008.

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