Press Releases

Balance of Payments: MARCH 2009

22/05/2009 - Press Releases

Current account balance

In March 2009, the current account deficit dropped by €855 million year-on-year to €2,706 million, reflecting a considerable contraction of the trade deficit, which was only partly offset by a decline in the surplus of the services balance and a small increase in the deficit of the current transfers balance. During the same period, there was no remarkable change in the income account deficit.

The narrowing of the overall trade deficit by €1,093 million reflects a €514 million decrease in the trade deficit excluding oil and ships (as the import bill fell considerably, while export receipts showed an increase, which, however, was very small) and declines of €423 million and €156 million in the net oil import bill and net payments for purchases of ships, respectively.

The surplus of the services balance shrank by €208 million, mainly owing to a €152 million fall in net transport receipts.

The current transfers balance showed a deficit of €88 million, up by €27 million year-on-year. (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, 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 quarter of 2009, the current account deficit narrowed by €2,095 million or 22.2% year-on-year and reached €7,331 million, reflecting a considerable decrease in the trade deficit, while during the same period the surpluses of the services balance and the current transfers balance contracted and the income account deficit grew.

The €3,131 million fall in the overall trade deficit stems from decreases of €1,866 million or 27.6% in the trade deficit excluding oil and ships, €1,131 million in the net oil import bill and €134 million in net payments for purchases of ships. Regarding the trade deficit excluding oil and ships, the import bill fell by €2,309 million or 23.1%, i.e. more than export receipts, which declined by €443 million or 13.7%.

The surplus of the services balance shrank by €626 million, reflecting lower net transport receipts - gross transport receipts (mainly from merchant shipping) fell by 23.9% - and higher net payments for other services. Both travel spending by non-residents in Greece and travel spending by residents abroad dropped (by 18.2% and 16.7%, respectively); as a result, net travel payments remained virtually unchanged.

The income account deficit expanded by €286 million, as a result of higher net interest, dividend and profit payments. This development is mainly associated with a rise in, mainly, net interest payments on deposits and loans and - to a much lesser extent - dividend and profit payments, while net interest payments on Greek government bonds and Treasury bills showed a small decrease.

Finally, the surplus of the current transfers balance declined by €124 million, mainly reflecting a rise in general government payments to the EU.

Capital transfers balance

In March 2009, the capital transfers balance showed a surplus of €249 million, compared with €220 million in March 2008. (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-March 2009, the capital transfers balance showed a surplus of €480 million, down from €1,417 million in the corresponding 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 €1,860 million, compared with €2,921 million in the same period of 2008.

Combined current account and capital transfers balance

The combined current account and capital transfers balance (which reflects the economy's external financing requirements) showed a deficit of €2,457 million in March 2009, compared with a deficit of €3,341 million in March 2008. In the January-March 2009 period, this deficit reached €6,851 million, compared with €8,010 million in the same period of 2008, i.e. it dropped by 14.5%.

Financial account balance

In March 2009, non-residents' direct investment in Greece showed a net inflow of €191 million. The most important transaction in this category concerned a €64 million inflow for the completion of the acquisition of Lamda Development by HSBC Property Invest (Luxembourg). Residents' direct investment abroad showed a net outflow of €60 million. The most important transaction in this category concerned a €20 million outflow by EFG Eurobank for its participation in the share capital increase of its subsidiary Bank Post S.A. in Romania.

Under portfolio investment, a net inflow of €6.1 billion was recorded, reflecting a €3.4 billion rise (inflow) in non-residents' purchases of Greek government bonds and Treasury bills and a €2.3 billion decrease (inflow) in residents' investment in foreign bonds and Treasury bills. Moreover, a €401 million decrease (inflow) was recorded in residents' investment in shares of foreign companies.

Under "other" investment, a considerable net outflow of €3.3 billion was recorded, which is mainly attributable to a €4.5 billion increase (outflow) in resident credit institutions' and institutional investors' deposit and repo holdings abroad and a €806 million outflow for the repayment of loans granted by non-residents to the public and the private sector. These outflows were partly offset by a €2.0 billion increase (inflow) in non-residents' deposit and repo holdings in Greece.

In January-March 2009, direct investment showed a net inflow of €88 million. Specifically, net inflows of non-residents' funds for direct investment in Greece came to €341 million, while net outflows of residents' funds for direct investment abroad reached €253 million.

During the same period, a net inflow of €15.2 billion was recorded under portfolio investment. Specifically, there was an inflow of non-residents' funds for purchases of Greek government bonds and Treasury bills (of €9.4 billion). Inflows were also recorded owing to a €6.3 billion decrease in residents' investment in foreign bonds and Treasury bills. These inflows were offset only to a very small extent by a €379 million decrease (outflow) in non-residents' investment in shares of Greek firms.

Finally, under "other" investment, a net outflow of €8.3 billion is mainly attributable to a €8.8 billion increase (outflow) in resident credit institutions' and institutional investors' deposit and repo holdings abroad and a €1.6 billion outflow for the repayment of loans granted by non-residents to the public and the private sector. These outflows were only partly offset by a €2.0 billion increase (inflow) in non-residents' deposit and repo holdings in Greece.

At end-March 2009, Greece's reserve assets stood at €2.5 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 April 2009 will be released on 24 June 2009.

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