Press Releases

Balance of Payments: JULY 2008

19/09/2008 - Press Releases

Current account balance

In July 2008, the current account deficit grew by €43 million year-on-year, to reach €2,348 million, as a result of the expansion of the income account deficit and a decline in the surplus of the current transfers balance. By contrast, the trade deficit decreased and the surplus of the services balance increased.

The trade deficit narrowed by €168 million year-on-year as a result of declines in net payments for purchases of ships and in the trade deficit excluding oil and ships (of €210 million and €222 million, respectively), while the net oil import bill rose by €264 million. In particular with respect to the trade deficit excluding oil and ships, export receipts grew by €379 million or 37.2%, while the import bill increased by only €157 million or 4.3%.

The surplus of the services balance grew by €438 million, mainly as a result of increases in net transport and travel receipts (up €338 million and €64 million respectively). Moreover, net payments for other services fell by €36 million.

The €309 million rise in the income account deficit is mostly attributable to an increase in net interest, dividend and profit payments.

The surplus of the current transfers balance dropped significantly by €340 million in comparison with July 2007, as net EU transfers to general government decreased by €351 million. (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 January-July 2008 period, the current account deficit rose by €2,421 million over the same period of 2007 and reached €21,483 million. This development reflects increases mainly in the trade deficit and secondarily in the income account deficit, which were only partly offset by a rise in the surpluses of the current transfers balance and the services balance.

The €3,578 million rise in the overall trade deficit is attributable to increases of €2,209 million, €1,295 million and €74 million in the net oil import bill, the trade deficit excluding oil and ships, and net payments for purchases of ships, respectively. Regarding in particular the trade balance excluding oil and ships, export receipts grew by €969 million or 13.9%, while the corresponding import bill rose by €2,264 million or 10.1%.

The surplus of the services balance expanded by €966 million, mostly reflecting higher net transport receipts (up €1,013 million). It should be noted that gross transport receipts (mainly from merchant shipping) increased by 24.3%. Net travel receipts rose by €198 million year-on-year, as gross receipts (i.e. travel spending in Greece by non-residents) grew by €332 million (or 5.9%), while gross payments (i.e. travel spending abroad by residents of Greece) increased by €134 million (or 10.1%). Net payments for other services rose by €245 million.

The income account deficit expanded by €893 million, mainly as a result of higher net interest, dividend and profit payments. This development is largely associated with a rise in non-residents' holdings of Greek public debt.

Finally, the substantial increase of €1,085 million in the surplus of the current transfers balance is attributable mainly to a strong rise in EU transfers to general government and secondarily to a decline in general government payments to the EU.

Capital transfers balance

In July 2008, the capital transfers balance showed a surplus of €402 million, compared with €153 million in July 2007. (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-July 2008 period, the capital transfers balance showed a surplus of €2,585 million (up €95 million year-on-year). Finally, the overall transfers balance (current transfers plus capital transfers) recorded a surplus of €5,020 million, up €1,180 million in comparison with the corresponding period of 2007.

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 €1,947 million in July 2008, compared with a deficit of €2,152 million in the same month of 2007. In the January-July 2008 period, this deficit came to €18,898 million, compared with €16,573 million in the same period of 2007.

Financial account balance

In July 2008, residents' direct investment abroad came to €126 million, while non-residents' direct investment in Greece amounted to €88 million. The most important direct investment by residents abroad concerned an outflow of €24 million for the increase in the participation of Piraeus Bank in the capital of Atlas Bank (Serbia), while the most important direct investment by non-residents in Greece concerned an inflow of €22 million for the participation of Xanatech Ltd (Cyprus) in the capital increase of Channel Nine S.A. Under portfolio investment, a net inflow of €8,073 million was recorded, attributable to, chiefly, non-residents' purchases of Greek government bonds and Treasury bills (worth €7,281 million) and shares of Greek firms (of €406 million), as well as residents' sales of foreign bonds and Treasury bills (worth €631 million). These developments were partly offset by residents' purchases of shares of foreign firms (worth €266 million). "Other" investment recorded a net outflow of €6,253 million, mainly reflecting a €6,369 million rise in Greek credit institutions' deposit and repo holdings abroad, a €295 million outflow for residents’ net lending to non-residents, as well as a €318 million outflow for net repayment of loans granted by non-residents to residents (in the public and the private sector). These developments were offset to a small extent by a €742 million rise in non-residents' deposit and repo holdings in Greece.

In the January-July 2008 period, direct investment showed a net inflow of €1,512 million. Specifically, net inflows of non-residents' funds for direct investment in Greece came to €2,804 million, while net outflows of residents' funds for direct investment abroad reached €1,292 million. During the same period, a net inflow of €8,389 million was recorded under portfolio investment. Specifically, the inflows due to non-residents' purchases of Greek government bonds and Treasury bills (of €17.0 billion) and residents' sales of foreign shares (of €0.8 billion) offset outflows due to residents' purchases of foreign bonds and Treasury bills (worth €8.1 billion) and non-residents' sales of shares of Greek firms (worth €1.3 billion). Finally, under "other" investment, a net inflow of €8.8 billion is attributable to the fact that the inflows of non-residents' funds for investment in deposits and repos in Greece were almost €10 billion higher than the increase in residents' corresponding investment abroad.

At end-July 2008, Greece's reserve assets reached €2.4 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 August 2008 will be released on 20 October 2008.

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