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Balance of payments: MAY 2008

22/07/2008 - Press Releases

Current account balance

In May 2008, the current account deficit grew by €1,183 million year-on-year, to reach €3,293 million, as a result mainly of an increase in the trade deficit and, secondarily, a widening of the income account deficit and a decline in the surplus of the current transfers balance, while the surplus of the services balance remained almost unchanged.

The year-on-year rise of €812 million in the overall trade deficit is almost equally attributable to increases of €450 million and €413 million in the trade deficit excluding oil and ships and the net oil import bill respectively, while net payments for purchases of ships decreased by €50 million.

Despite increases in net travel and transport receipts (up €88 million and €33 million respectively), the surplus of the services balance remained almost unchanged, as net payments for other services grew (by €127 million).

The €299 million rise in the income account deficit is almost equally attributable to increases in net payments for interest and net payments for dividends and profits.

The surplus of the current transfers balance shrank by €66 million year-on-year, mainly because the net receipts of the other sectors (excluding general government) decreased by €55 million. Net EU transfers to general government dropped only slightly (by €11 million). (It should be noted 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-May 2008, the current account deficit rose by €1,907 million over the same period of 2007 and reached €16,178 million. This development reflects large increases in both the trade deficit and the income account deficit, which were only partly offset by a large rise in the surplus of the current transfers balance and a sizeable increase in the surplus of the services balance.

The €2,894 million rise in the overall trade deficit is attributable to increases of €1,616 million, €991 million and €286 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 €447 million or 9.1%, while the corresponding import bill rose by €1,438 million or 9.3%.

The surplus of the services balance expanded by €328 million, reflecting exclusively higher net transport receipts. It should be noted that gross transport receipts (mainly from merchant shipping) increased by 21.3%. Net travel receipts did not change considerably year-on-year, as gross receipts (i.e. travel spending in Greece by non-residents) rose by €157 million (or 8.2%), while gross payments (i.e. travel spending abroad by residents of Greece) increased by €151 million (or 16.0%). Besides, net payments for other services grew by €232 million.

The income account deficit rose by €754 million, exclusively 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 large increase of €1,413 million in the surplus of the current transfers balance is attributable to, mainly, a substantial rise in EU transfers to general government and, secondarily, a decline in general government payments to the EU.

 

Capital transfers balance

In May 2008, the capital transfers balance showed a surplus of €314 million, compared with just €4 million in April 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-May 2008 period, the capital transfers balance showed a surplus of €2,108 million (down €168 million year-on-year). This reflects a decline in EU capital transfers to general government. However, the overall transfers balance (current transfers plus capital transfers) recorded a surplus of €4,206 million, up €1,244 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 €2,979 million in May 2008, compared with a deficit of €2,106 million in the corresponding month of 2007. In the January-May 2008 period, this deficit came to €14,070 million, compared with €11,994 million in the corresponding period of 2007.

Financial account balance

In May 2008, residents' direct investment abroad came to €158 million. The most important investment concerned an outflow of €49 million for the participation of ALPHA BANK in the share capital increase of its subsidiary in Serbia ALPHA BANK SRBJIA A.D. Non-residents' direct investment in Greece showed a considerable inflow of €2,642 million, of which €2,548 million concerned the acquisition of 19.99% of the share capital of the Hellenic Telecommunications Organisation (OTE) by the German company DEUTSCHE TELEKOM.

Under portfolio investment, a net outflow of €5,370 million was recorded, attributable to, chiefly, residents' purchases of foreign bonds and Treasury bills (worth €4.8 billion). "Other" investment recorded a considerable net inflow of €6,012 million, mainly resulting from a large increase in non-resident credit institutions' deposit and repo holdings in Greece, which exceeded by far the rise in Greek credit institutions' corresponding investment abroad.

In the January-May 2008 period, direct investment showed a net inflow of €1,670 million. Specifically, net inflows of non-residents' funds for direct investment in Greece came to €2,704 million, while net outflows of residents' funds for direct investment abroad reached €1,034 million. During the same period, a net outflow of €1,584 million was recorded under portfolio investment. Specifically, the inflows due to non-residents' purchases of Greek government bonds and Treasury bills (of €8.7 billion) was more than offset by outflows due to non-residents' sales of shares of Greek firms (worth €1.1 billion) and residents' purchases of foreign bonds and Treasury bills (worth €9.5 billion). Finally, under "other" investment, a net inflow of €14,453 million is attributable to the fact that the inflows of non-residents' funds for investment in deposits and repos in Greece were more than double the increase in residents' corresponding deposits abroad.

At end-May 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 June 2008 will be released on 19 August 2008.

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