Press Releases

Balance of payments: AUGUST 2006

20/10/2006 - Press Releases

Current account balance

In August 2006, the current account balance showed a deficit of €138 million, compared with a surplus of €384 million in the corresponding month of 2005. This development reflects an increase mainly in the trade deficit and, secondarily, in the income account deficit, which was only partly offset by a rise in the surpluses of both the services balance and the current transfers balance.

Underlying the widening of the trade deficit were increases in the net oil import bill by €352 million, in net payments for purchases of ships by €239 million and in the other goods deficit by only €138 million. The rise in the surplus of the services balance reflects a €188 million hike in net travel receipts (receipts grew by €170 million or 6.8% and payments dropped by €18 million) and a €48 million increase in net receipts from transport services, while net payments for ''other'' services rose by €24 million. The widening of the income account deficit is mainly accounted for by a €119 million rise in net interest, dividend and profit payments. Finally, the improvement in the current transfers surplus reflects almost entirely a €121 million rise 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-August 2006, the current account deficit widened by €6,884 million over the same period of 2005 and reached €14,869 million, reflecting mainly a rise in the trade deficit and, to a lesser extent, an increase in the income account deficit and a narrowing of the services and the current transfers surpluses.

The widening of the overall trade deficit (including oil and ships) by €5,505 million is due to the increase of net payments for purchases of ships (by €2,076 million), the rise in the net oil import bill (by €1,984 million) and the increase in the deficit excluding oil and ships (by €1,445 million). It should be pointed out that receipts from goods exports (excluding oil and ships) showed a remarkable rise (by €815 million or 12.2%), but the increase in the corresponding import bill (by €2,260 million or 11.1%) was larger in absolute terms. The services surplus narrowed by €196 million, as a result of, mainly, a €509 million drop in net transport receipts (transport - chiefly shipping - receipts grew by only €38 million or 0.4%, while transport payments increased by €547 million or 13.6%) and, secondarily, a €318 million rise in net payments for ''other'' services. By contrast, net travel receipts grew by €631 million (travel receipts rose by €535 million or 6.9%, while payments fell by €96 million or 5.8%). The income account deficit increased by €1,094 million, mainly as a result of higher net interest, dividend and profit payments. Finally, the current transfers surplus narrowed by €89 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 August 2006, the surplus of the capital transfers balance shrank considerably to €2 million, compared with €57 million in the corresponding month of 2005. (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 - August 2006, the surplus of the capital transfers balance almost doubled year-on-year and reached €2,005 million. This reflects almost exclusively a €916 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 (according to the old method of presentation) showed a deficit of €136 million in August 2006, compared with a surplus of €441 million in the corresponding month of 2005. Thus, in January - August 2006, the overall deficit reached €12,864 million, compared with €6,902 million in the corresponding period of 2005.

Financial account balance

In August 2006, two considerable flows were recorded under direct investment. The first concerned residents' direct investment abroad - namely a €2,154 million outflow for the acquisition of the Turkish FINANSBANK by the NATIONAL BANK OF GREECE. The second, which was almost of the same size, concerned non - residents' direct investment in Greece. Specifically, there was an inflow of €2,090 million for the acquisition of EMPORIKI BANK by CREDIT AGRICOLE (through an increase in the latter's participation in the former's share capital from 8.2% to 72.0%). Mainly as a result of these two transactions, direct investment in Greece showed a net outflow of €159 million in August.

Under portfolio investment, a net inflow of €1,249 million was recorded, largely as a result of both non-residents' purchases of Greek government bonds and residents' sales of foreign bonds. This net inflow recorded in the bond market was partly offset by an outflow reflecting sales of shares of Greek firms by non - residents and purchases of shares of foreign firms by residents. ''Other'' investment recorded a net outflow of €1,099 million, as the increase in residents' external assets (exclusively accounted for by resident credit institutions' higher deposit and repo holdings abroad) outweighed a rise in residents' external liabilities (largely as a result of an increase in non-residents' deposit and repo holdings in Greece).

In January-August 2006, direct investment showed a net inflow of €811 million (compared with a net inflow of just €52 million in the same period of 2005). Specifically, net inflows of non-residents' funds for direct investment in Greece reached €3,569 million, while net outflows of residents' funds for direct investment abroad came to €2,758 million. Over the same period, a net inflow of €3,790 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 €8.1 billion and €3.3 billion respectively) more than offset the repayment of short - term Greek government securities and the outflow of residents' funds for investment in foreign bonds, shares and Treasury bills. Finally, under ''other'' investment, a net inflow of €8,376 million reflects the fact that the inflow of non-residents' funds (of €15,639 million), mainly to deposits and repos in Greece, was more than double the outflow of residents' funds (€7,262 million) for corresponding investment abroad.

At end-August 2006, Greece's reserve assets reached €2.3 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 September 2006 will be released on 21 November 2006.

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