Press Releases

Balance of Payments: September 2009

18/11/2009 - Press Releases

Current account balance

In September 2009, the current account deficit reached €1,561 million, considerably lower than in September 2008, due to, mainly, a large contraction of the trade deficit and, secondarily, a decrease in the income account deficit. These developments more than offset the declines in, primarily, the surplus of the services balance and, secondarily, the surplus of the current transfers balance.

The €1,540 million fall in the overall trade deficit stemmed from declines of €792 million, €399 million and €349 million in the net oil import bill, net payments for purchases of ships and the trade deficit excluding oil and ships (as the drop in the import bill was almost double the decrease in export receipts), respectively.

The surplus of the services balance shrank by €310 million, mainly owing to a €341 million fall in net transport receipts, as gross transport (mainly shipping) receipts fell substantially (by 34%). Net travel receipts showed a small decrease (of €9 million). Specifically, non-residents’ travel spending in Greece dropped by 2.9% year-on-year, while the corresponding decline in residents’ travel spending abroad was much larger (17.8%). The income account deficit decreased by €53 million, chiefly owing to lower net interest, dividend and profit payments. Finally, the current transfers balance showed a deficit of €20 million, compared with a surplus of €112 million in September 2008, as a result of, mainly, a decline in general government receipts from the EU and, secondarily, a rise in the corresponding payments. (It should be recalled that gross 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 January-September 2009, the current account deficit narrowed by €6,210 million or 25.3% year-on-year and reached €18,332 million, reflecting primarily a large decrease in the trade deficit and – to a much lesser extent – a decline in the income account deficit. At the same time, however, the surpluses of the services balance and the current transfers balance shrank considerably.

The €11,000 million drop in the overall trade deficit is attributable to decreases of €5,712 million, €3,968 million and €1,320 million in the trade deficit excluding oil and ships, the net oil import bill and net payments for purchases of ships, respectively. Regarding the trade deficit excluding oil and ships, the import bill fell by €7,645 million or 24.6%, i.e. much more than export receipts, which declined by €1,933 million or 18.6%.

The €3,965 million contraction of the surplus of the services balance mainly reflects lower net transport and travel receipts. Gross transport receipts (chiefly from merchant shipping) fell considerably (by 31.6%); as a result, net transport receipts dropped by €2,772 million. Moreover, travel spending in Greece by non-residents decreased by 11.6%, while travel spending abroad by residents declined by 6.4%; as a result, net travel receipts fell by €1,072 million. Finally, net payments for “other” services grew by €121 million.

The income account deficit dropped by €386 million in comparison with the corresponding period of 2008, because net interest, dividend and profit payments decreased as a result of international money and capital market developments. Finally, the surplus of the current transfers balance narrowed by €1,212 million due to, mainly, lower EU transfers to general government and, secondarily, higher government payments to the EU.

Capital transfers balance

In September 2009, the capital transfers balance showed a deficit of €13 million, compared with a surplus of €70 million in September 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-September 2009, the capital transfers balance showed a surplus of €1,521 million, compared with €3,043 million in the corresponding period of 2008. This chiefly reflects a decline in EU capital transfers to general government. Thus, the overall transfers balance (current transfers plus capital transfers) recorded a surplus of €3,006 million, compared with €5,739 million in the corresponding period of 2008.

Combined current account and capital transfers balance

The deficit of the combined current account and capital transfers balance (which reflects the economy’s external financing requirements) came to €1,574 million in September 2009, compared with €2,642 million in September 2008. In the January-September 2009 period, this deficit reached €16,811 million, compared with €21,499 million in the same period of 2008, i.e. it dropped by 21.8%.

Financial account balance

In September 2009, residents’ direct investment abroad recorded a net outflow of €156 million. The most important transaction in this category concerned a €114 million outflow for the participation of Marfin Investment Group in the share capital increase of Marfin Investment Group Real Estate (in the Netherlands). Non-residents’ direct investment in Greece showed a net inflow of €22 million, without any remarkable transactions.

Under portfolio investment, a net inflow of €2.0 billion was recorded, reflecting an increase (inflow) in non-residents’ purchases of Greek government bonds and Treasury bills (€2.2 billion) and, secondarily, shares of Greek firms (€0.7 billion). This inflow was partly offset by a rise (outflow) in residents’ investment in foreign bonds/Treasury bills and shares of foreign firms (of €0.6 billion and €0.2 billion, respectively).

Under “other” investment, a net outflow of €0.7 billion was recorded, which is mainly attributable to a €6.1 billion increase in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad, which was partly offset by a €5.1 billion hike in non-residents’ deposit and repo holdings in Greece and a €0.4 billion rise in loans granted by non-residents to the public and the private sector.

In January-September 2009, direct investment showed a net inflow of €1.6 billion. Specifically, net inflows of non-residents’ funds for direct investment in Greece came to €2.3 billion (compared with €2.7 billion in the corresponding period of 2008) and mainly concerned increases in the participation in the share capital of Emporiki Bank and the Hellenic Telecommunications Organisation (OTE), while net outflows of residents’ funds for direct investment abroad reached €0.7 billion (compared with €1.8 billion in the corresponding period of 2008).

During the same period, a net inflow of €23.1 billion was recorded under portfolio investment. This mainly reflects inflows due to non-residents’ purchases of Greek government bonds and Treasury bills (of €31.7 billion) and shares of Greek firms (€0.9 billion). At the same time, an outflow was observed due to a €7.9 billion increase in residents’ investment in foreign bonds and Treasury bills and a €1.2 billion rise in residents’ investment in foreign shares.

Finally, under “other” investment, a net outflow of €7.5 billion reflects a €19.3 billion increase in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad, which was only partly offset by a €7.1 billion rise in non-resident credit institutions’ and institutional investors’ corresponding holdings in Greece, as well as a €4.9 billion inflow of funds for loans granted by non-residents to both the public and the private sector.

At end-September 2009, Greece’s reserve assets stood at €3.5 billion. The €144 million increase in reserve assets in comparison with the immediately preceding month (August 2009) is attributable only by €15 million to balance of payment transactions, while the remaining €129 million reflect (a) a €66 million rise in the Special Drawing Rights allocated to Greece (this was the second rise, effected on 9 September 2009, after an earlier one on 28 August 2009); and (b) valuation gains of €63 million on monetary gold. (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 October 2009 will be released on 18 December 2009.

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