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Balance of payments: July 2012

18/09/2012 - Press Releases

Current account balance

In July 2012, the current account balance showed -- for the first time since May 2010 -- a surplus, which came to €642 million, compared with a €880 million deficit in July 2011.

The trade deficit fell by €836 million, as a result of a €389 million decrease in the trade deficit excluding oil and ships, as well as declines of €305 and €142 million in net payments for purchases of ships and the net oil bill, respectively. The trade deficit excluding oil and ships shrank due mainly to the considerably reduced import bill (down by €346 million or 15.8%), as export receipts rose by only €43 million or 3.9%.

The surplus of the services balance increased by €56 million as a result of a rise in net transport receipts and an improvement in the “other” services balance, which more than offset a decline in net travel receipts. In more detail, compared with July 2011, travel spending in Greece by non-residents declined by 2.8% and travel spending abroad by residents fell by 11.9%; as a result, net receipts decreased by €35 million. In the same month, non-residents’ arrivals decreased by 4.1%, according to data from the Bank of Greece’s border survey. Gross transport receipts (chiefly from merchant shipping) fell by 2.9% and the corresponding payments declined by 14.8%, resulting in higher net receipts by €56 million.

The income account deficit fell by €749 million, almost exclusively on account of lower net payments for interest, dividends and profits, which, in turn, mainly reflect a €573 million decline in net interest payments on Greek government bonds held by non-residents following the PSI.

Finally, the current transfers balance showed a deficit of €89 million, compared with a surplus of €31 million in July 2011, chiefly as a result of net general government transfer payments (mainly to the EU), compared with net transfer receipts in July 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-July 2012 period, the current account deficit contracted by €7.4 billion or 53.3% year-on-year, to €6.5 billion. This development mainly reflects a substantial decline of €3.9 billion in the non-oil trade deficit and a €2.8 billion decrease in the income account deficit, as well as increases of €486 million and €88 million in the surpluses of the services balance and the current transfers balance.

In more detail, the trade deficit decreased by €4.0 billion, as a result of a €2.4 billion (or 30.4%) decline in the trade deficit excluding oil and ships and a €1.5 billion drop in net payments for purchases of ships, whereas the net oil bill recorded a very small decrease (of €71 million or 1.1%). Receipts from exports of goods excluding oil and ships rose by 5.9%, while the corresponding import bill fell at a much faster (double) pace (by 12.8%).

The increase observed in the surplus of the services balance in the first seven months of 2012 is primarily due to higher net transport receipts and, secondarily, lower net payments for “other” services, while net travel receipts declined. In more detail, travel spending in Greece by non-residents fell markedly (by 7.0%) year-on-year, reflecting also a drop in non-residents’ arrivals at an average annual rate of 7.2% (according to data from the Bank of Greece’s border survey). At the same time however, travel spending abroad by residents fell by 15.6%, thus limiting the decline in net receipts to €170 million. Over the same period, gross transport receipts (chiefly from merchant shipping) remained almost unchanged (-0.9%), but the corresponding payments dropped by 13.5%; as a result, net receipts rose by €514 million.

The income account deficit fell by €2.8 billion year-on-year, mainly owing to a sharp decline in net interest payments on Greek government bonds held by non-residents following the PSI, as well as deferred interest payments on loans provided under the support mechanism through the ECB, owing to an interest rate adjustment, as already mentioned in the June 2012 press release.

Finally, the current transfers balance showed a surplus of €1.1 billion, up by €88 million year-on-year. This development is due to a €129 million decline in the net transfer payments of sectors other than general government (mainly emigrants’ remittances), while net transfer receipts of general government (mainly from the EU) fell by €42 million.

Capital transfers balance

In July 2012, the capital transfers balance showed a surplus of €151 million, compared with €254 million in July 2011, reflecting a decline 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-July 2012 period, the capital transfers balance showed a surplus of €1.2 billion, compared with €564 million in the corresponding period of 2011. This stems exclusively from a rise in net EU capital transfers to general government.

The overall transfers balance (current transfers plus capital transfers) recorded a surplus of €2.3 billion in the period under review, up by €743 million year-on-year, reflecting the above-mentioned positive development in EU capital transfers.

Combined current account and capital transfers balance

The combined current account and capital transfers balance (corresponding to the economy’s external financing requirements) showed -- for the first time since August 2011 -- a surplus, which came to €793 million in July 2012, compared with a €625 million deficit in July 2011. In the January-July 2012 period, this balance showed a deficit of €5.2 billion, compared with €13.3 billion in the corresponding period of 2011 (down by 60.5%), i.e. it fell at a faster pace than the current account deficit.

Financial account balance

In July 2012, non-residents’ direct investment in Greece showed a net inflow of €2.2 billion. The most significant transaction concerns an inflow of €2,320 million for the participation of Crédit Agricole (France) in the share capital increase of Emporiki Bank. Residents’ direct investment abroad recorded a net outflow (increase) of €3 million, without any remarkable transaction.

As regards portfolio investment, a net outflow of €517 million was recorded, reflecting (a) a €682 million increase in residents’ holdings of foreign bonds and Treasury bills; (b) an €18 million rise in residents’ holdings of foreign shares; and (c) a €22 million increase in residents’ investment in foreign derivatives. These developments were partly offset by an inflow of €203 million, due to a rise in non-residents’ holdings of Greek bonds and Treasury bills.

Under “other” investment, a net inflow of €2.6 billion was recorded, which is mainly attributable to a net decline of €3.2 billion in non-residents’ deposit and repo holdings in Greece (outflow), as well as a net decline of €254 million in the outstanding debt of the public and the private sector to non-residents (outflow). These developments were offset by a €920 million decrease in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (inflow).

In the January-July 2012 period, direct investment showed a net inflow of €2.6 billion (compared with a net outflow of €1.3 billion in the corresponding period of 2011). Specifically, non-residents’ direct investment in Greece showed a net inflow of €2.3 billion, while residents’ direct investment abroad showed a net inflow of €225 million (disinvestment).

A net outflow of €72.5 billion was observed under portfolio investment (against a net inflow of €9.4 billion in the corresponding period of 2011). In more detail, an outflow of funds was recorded, on the one hand due to a €39.8 billion increase in resident institutional investors’ holdings of foreign bond and Treasury bills (including EFSF bonds) and, on the other hand, a €31.6 billion decrease in non-residents’ holdings of Greek bonds and Treasury bills. Furthermore, an outflow of funds was recorded also on account of increases of €679 million and €230 million in residents’ holdings of foreign financial derivatives and foreign shares, respectively. A €145 million outflow was also recorded due to a decline in non-residents’ holdings of shares of Greek firms.

Under “other” investment, a net inflow of €76.1 billion was recorded (compared with a net inflow of €24.4 billion in the corresponding period of 2011). This is chiefly attributable to a €76.1 billion increase (inflow) in the net outstanding debt of the public and the private sector to non-residents and to a €12.1 billion decline in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad (inflow). In more detail, net general government borrowing came to €75.1 billion and reflects gross public sector borrowing of €75.6 billion from the EFSF and the IMF. These developments were partly offset by an €11.9 billion decline in non-residents’ holdings of deposits and repos in Greece (outflow).

At end-July 2012, Greece’s reserve assets stood at €5.5 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. Excluded are euro-denominated claims on non-euro area residents, claims (in foreign currency and in euro) on euro area residents, and the Bank of Greece share in the capital and reserves of the ECB.)

Note: Balance of payments data for August 2012 will be released on 22 October 2012.

Related link: Balance of payments: July 2012 - Table

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