Balance of payments: February 2012

19/04/2012 - Press Releases

Current account balance

In February 2012 the current account balance showed a deficit of €1.1 billion, down by €781 million or 41.6% year-on-year.

The trade deficit fell by €581 million, mainly as a result of a decrease of €379 million in the trade deficit excluding oil and ships, as well as declines of €95 and €107 million in the net import bill for oil and ships, respectively. The trade deficit excluding oil and ships declined mainly due to the considerably reduced import bill (by €364 million or 17.8%), whereas the rise in export receipts was very small, by €16 million or 1.6%.

The services surplus increased by €215 million as a result mainly of higher net transport receipts and a decline in net payments for “other” services. Also, the travel services balance showed a small surplus of €0.7 million, compared with a deficit of €20 million in February 2011. In more detail, travel spending in Greece by non-residents decreased by 26.0% year-on-year (according to data from the Bank of Greece’s border survey, non-residents’ arrivals dropped by 20.1%), while travel spending by residents abroad fell by 35.7%. Gross transport receipts (chiefly from merchant shipping) remained virtually unchanged (+2.0%), but the corresponding payments dropped significantly (by 13.7%); as a result, net receipts grew by 21.2%.

The income account deficit shrank by €45 million owing to a decline in net interest, dividend and profit payments.

Finally, the current transfers surplus declined by €59 million year-on-year, reflecting a drop of €65 million in general government net transfer receipts (chiefly from the EU). Concurrently, the “other sectors” (mainly emigrants’ remittances) showed slightly higher net receipts than in February 2011. (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-February 2012 period, the current account deficit fell by €2.05 billion or 44.1% year-on-year, to €2.6 billion. This development mainly reflects a significant decline of €841 million in the non-oil trade deficit and a drop of €634 million in the net import bill for oil. It should be noted that the apparent reduction in the net oil import bill is attributable: (a) as regards January 2012, chiefly to base effects, since net payments in January 2011 included increased expenditure which also concerned imports of the year 2010 (the relevant payment had been deferred by the importer), and (b) as regards February 2012, possibly also to a decline in the volume of oil imports. Moreover, the services and the current transfers surplus increased by €432 and €50 million respectively, whereas the income account deficit shrank by €90 million.

In more detail, the overall trade deficit decreased by €1.5 billion, as a result of a €597 million (or 25.8%) decline in the trade deficit excluding oil and ships and a €244 million drop in net payments for purchases of ships, whereas the net oil import bill declined considerably, as already mentioned. Receipts from exports of goods excluding oil and ships rose at a fast rate (12.3%) year-on-year, whereas the corresponding import bill registered a decline at a relatively slower rate (8.7%).

An increase in the surplus of the services balance reflects significantly lower net payments for “other” services, higher net transport receipts and lower net travel payments. In more detail, travel spending in Greece by non-residents fell markedly (by 17.5%) year-on-year, reflecting the drop in non-residents’ arrivals at an average year-on-year rate of 11.1% (according to data from the Bank of Greece’s border survey). Moreover, travel spending abroad by residents of Greece fell by 26.1%. During the same period, gross transport receipts (chiefly from merchant shipping) remained broadly unchanged (+0.4%) and the corresponding payments dropped by 13.8%; as a result, net receipts rose by €179 million.

The income account deficit decreased by €90 million year-on-year, mainly due to lower net interest, dividend and profit payments (down by 10.3%).

Finally, the current transfers balance showed a surplus of €1.4 billion, up by €50 million compared with the corresponding period of 2011. This development is mainly due to a rise of €33 million in the current transfer receipts of general government (mainly from the EU) and, secondarily, a decline of €17 million in net capital transfer payments of sectors other than general government (mainly emigrants’ remittances).

Capital transfers balance

In February 2012, the capital transfers balance showed a surplus of €1.1 billion, compared with a surplus of €338 million in February 2011, reflecting a rise in net EU capital transfers 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 the January-February 2012 period, the capital transfers balance showed a surplus of €1.0 billion, compared with €326 million in the corresponding period of 2011. This mostly reflects a rise in net EU capital transfers to general government.

The overall transfers balance (current transfers plus capital transfers) recorded a surplus of €2.4 billion in the January-February 2012 period, up by €746 million year-on-year, reflecting the above-mentioned positive development in EU capital transfers.

Combined current account and capital transfers balance

In February 2012, the combined current account and capital transfers balance (corresponding to the economy’s external financing requirements) showed a deficit of only €53 million, compared with a deficit of €1.5 billion in February 2011. In the January-February 2012 period, this balance showed a deficit of €1.6 billion, compared with €4.3 billion in the corresponding period of 2011, decreasing by 63.6%, i.e. at a faster pace than the current account deficit.

Financial account balance

In February 2012, non-residents’ direct investment in Greece showed a net outflow of €111 million, mainly due to negative reinvested earnings (i.e. losses rather than profits in the balances of companies with direct investments in Greece). Residents’ direct investment abroad recorded a net outflow of €31 million, without any remarkable transaction.

Under portfolio investment, a net outflow of €1.5 billion was recorded, reflecting both a €1.2 billion decrease in non-residents’ investment in Greek bonds and Treasury bills (outflow) and a €290 million rise in residents’ investment in foreign bonds and Treasury bills (outflow).

Under “other” investment, a net inflow of €2.5 billion was recorded, which mainly reflects a €3.3 billion net decline in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (inflow) and a €497 million increase in the outstanding debt of the public and the private sector to non-residents (inflow). These developments were offset by a €1.3 billion decrease in non-residents’ deposit and repo holdings in Greece (outflow).

In the January-February 2012 period, direct investment showed a net outflow of €305 million (compared with a net outflow of €321 million in the corresponding period of 2011). Specifically, non-residents’ investment in Greece showed a net outflow of €226 million, while net outflows of residents’ funds for direct investment abroad reached €78 million.

A net outflow of €1.6 billion was observed under portfolio investment (against a net outflow of €131 million in the corresponding period of 2011). In more detail, an outflow was recorded due to a decrease of €1.0 billion in non-residents’ holdings of Greek government bonds and Treasury bills, a €490 million rise in resident institutional investors’ holdings of foreign bonds and Treasury bills and a €142 million increase (outflow) in residents’ investment in foreign derivatives. In the same period, there were both a €159 million decline in residents’ holdings of foreign shares (inflow) and an €83 million decrease in non-residents’ holdings of shares of Greek firms (outflow).

Under “other” investment, a net inflow of €4.7 billion was recorded (compared with a net inflow of €4.1 billion in January-February 2011). This inflow is chiefly attributable to a €5.0 billion decline in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (inflow) and, secondarily, to a €621 million increase in non-residents’ deposit and repo holdings in Greece. This development was partly offset by an €834 million decline in the outstanding debt of the public and the private sector to non-residents (outflow).

At end-February 2012, Greece’s reserve assets stood at €5.3 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 March 2012 will be released on 23 May 2012.