Press Releases

Balance of Payments: OCTOBER 2006

20/12/2006 - Press Releases

Current account balance

In October 2006, the current account balance showed a deficit of €2,052 million, i.e. €711 million higher than in the corresponding month of 2005. This expansion reflects an increase in the trade deficit, as the rise in the surpluses of the services balance and the current transfers balance was fully offset by the growth of the income account deficit.

Underlying the widening of the trade deficit were increases of €476 million, €133 million and €102 million in the other goods (excluding oil and ships) deficit, net payments for purchases of ships, and the net oil import bill, respectively. The €97 million rise in the surplus of the services balance reflects a €166 million hike in net transport receipts, which was partly offset by a €78 million rise in net payments for ''other'' services, while there was no considerable change in the travel balance. The widening of the income account deficit by €136 million mainly reflects an increase in net interest payments on non - residents' deposits in Greece, on loans granted to residents and on non - residents' Greek government bond holdings. Finally, the growth of the current transfers surplus reflects a commensurate increase in net current transfers from the EU to general government. It should be recalled that 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 and receipts from the European Social Fund, while current transfers to the EU include Greece’s contributions (payments) to the Community Budget.

In January-October 2006, the current account deficit widened by €8,146 million over the same period of 2005 and reached €18,089 million, reflecting mainly a rise in the trade deficit and, to a lesser extent, an increase in the income account deficit and a small decline in the services and the current transfers surpluses.

The widening of the overall trade deficit (including oil and ships) by €6,738 million was a result of increases in net payments for purchases of ships, the net oil import bill, and the deficit excluding oil and ships (of €2,456 million, €2,175 million and €2,106 million, respectively). It should be pointed out that receipts from goods exports (excluding oil and ships) showed a considerable rise (of €1,070 million or 12.7%), but the increase - in absolute terms - in the corresponding import bill (of €3,176 million or 12.5%) was larger. The slight decline in the services surplus reflects a €317 million drop in net transport receipts (transport - chiefly shipping - receipts grew by €390 million or 3.4%, while transport payments increased by €707 million or 13.9%) and a €429 million rise in net payments for ''other'' services, which more than offset a €737 million increase in net travel receipts (travel receipts rose by €647 million or 6.2%, while payments declined by €89 million or 4.5%). The income account deficit grew by €1,334 million, mainly as a result of higher net interest, dividend and profit payments. Finally, the current transfers surplus narrowed by €66 million, as the decrease in net (mainly EU) current transfers to general government more than offset a rise in net current transfers to the other sectors (excluding general government).

Capital transfers balance

In October 2006, the capital transfers balance showed a surplus of €70 million, €28 million up year - on - year, mainly as a result of an increase in capital transfers from the EU to general government. (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 January - October 2006, the surplus of the capital transfers balance grew substantially year - on - year and reached €2,135 million. This reflects almost exclusively a €743 million rise in EU capital transfers to general government.

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

The combined current account and capital transfers balance (old method of presentation) showed a deficit of €1,982 million in October 2006, €683 million up year - on - year. In January - October 2006, the overall deficit reached €15,954 million, compared with €8,555 million in the same period of 2005.

Financial account balance

In October 2006, no considerable flows were recorded under non - residents' direct investment in Greece. Under residents' direct investment abroad, the most important flow (of €93.5 million) reflected the partial acquisition of AGROINDUSTRIJKA KOMERCIJALNA BANK (Serbia) by the Agricultural Bank of Greece. Under portfolio investment, a net outflow of €2,505 million was recorded, mainly reflecting non - residents' sales of Greek government bonds and, to a lesser extent, residents' purchases of foreign bonds, which, however, were partly offset mainly by non - residents' purchases of shares of Greek firms and residents' disinvestment of foreign financial derivatives. ''Other'' investment recorded a net inflow of €4,091 million, which is almost exclusively attributable to an increase in foreign credit institutions' deposit and repo holdings in Greece.

In January-October 2006, direct investment showed a net inflow of €768 million (compared with a net outflow of €670 million in the same period of 2005). Specifically, net inflows of non - residents' funds for direct investment in Greece reached €3,755 million, while net outflows of residents' funds for direct investment abroad came to €2,987 million. Over the same period, a net inflow of €3,141 million was recorded under portfolio investment, as the inflow of non - residents' funds for investment in Greece (mainly in Greek government bonds and shares of Greek firms, of €8.8 billion and €4.2 billion respectively) largely offset the repayment of short - term Greek government securities and residents' outflows for investment in foreign bonds, shares and Treasury bills. Finally, under ''other'' investment, a net inflow of €11,964 million mainly reflects the fact that the inflow of non - residents' funds to deposits and repos in Greece was approximately three times the outflow of residents' funds for corresponding investment abroad.

At end - October 2006, Greece's reserve assets reached €2.1 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 2006 will be released on 23 January 2007.

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