Press Releases

Balance of payments: MAY 2009

21/07/2009 - Press Releases

Current account balance

In May 2009, the current account deficit narrowed by €1,239 million year-on-year to €2,039 million, reflecting mainly a large contraction of the trade deficit and, secondarily, a decline in the income account deficit and a rise in the surplus of the current transfers balance. By contrast, the surplus of the services balance decreased.

The narrowing of the overall trade deficit by €1,522 million stemmed from a €930 million drop in the trade deficit excluding oil and ships (as the import bill fell by 30.1%, i.e. at a rate double than export receipts, which decreased by 16.1%) and declines of €485 million and €107 million in the net oil import bill and net payments for purchases of ships, respectively.

The surplus of the services balance shrank by €539 million, mainly owing to a fall in net transport and travel receipts (of €356 million and €240 million, respectively). Specifically, non-residents’ travel spending in Greece and residents’ travel spending abroad dropped by 24.2% and 10.9% year-on-year, respectively. The income account deficit decreased by €165 million, mainly owing to a contraction in net interest, dividend and profit payments. Finally, the surplus of the current transfers balance almost doubled, mainly due to an increase in net EU transfers to general government. (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-May 2009, the current account deficit narrowed by €3,774 million or 23.3% year-on-year and stood at €12,396 million, reflecting a considerable decrease in the trade deficit. By contrast, the surpluses of the services balance and the current transfers balance shrank and the income account deficit showed a limited increase.

 The €5,876 million decline in the overall trade deficit is attributable to decreases of €3,310 million, €1,948 million and €617 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 €4,043 million or 23.9%, i.e. much more than export receipts, which declined by €733 million or 13.7%.

The surplus of the services balance shrank by €1,487 million, mainly reflecting lower net transport and travel receipts. It should be noted that gross transport receipts (mainly from merchant shipping) fell by 27.0% and net receipts by €1,124 million. Moreover, travel spending in Greece by non-residents and travel spending abroad by residents of Greece dropped (by 17.9% and 6.6%, respectively); as a result, net travel receipts declined by €299 million. Finally, net payments for “other” services grew by €64 million.

 The income account deficit expanded by €114 million, as a result of higher net interest, dividend and profit payments. This development is mainly associated with a rise in net interest payments on Greek Government bonds, Treasury bills, deposits and loans, which more than offset a decrease in net dividend and profit payments.

Finally, the surplus of the current transfers balance declined by €500 million, mainly reflecting a decrease in general government receipts from the EU and, secondarily, a rise in the corresponding payments.

Capital transfers balance

 In May 2009, the capital transfers balance showed a very small surplus of €13 million, compared with €314 million in May 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-May 2009, the capital transfers balance showed a surplus of €827 million, compared with €2,108 million in the corresponding period of 2008. This mainly reflects a decline in EU capital transfers to general government. Thus, the overall transfers balance (current transfers plus capital transfers) recorded a surplus of €2,425 million, compared with €4,206 million in the corresponding period of 2008.

 Combined current account and capital transfers balance (according to the old method of presentation)

The deficit of the combined current account and capital transfers balance (which reflects the economy’s external financing requirements) came to €2,026 million in May 2009, compared with €2,965 million in May 2008. In the January-May 2009 period, this deficit reached €11,569 million, compared with €14,062 million in the corresponding period of 2008, i.e. it dropped by 17.7%.

 Financial account balance

In May 2009, non-residents’ direct investment in Greece showed a net inflow of €244 million. The most important transactions in this category concerned, first, a €152 million inflow for the participation of Crédit Agricole SA (France) in the capital increase of Emporiki Bank, as a result of which the French company’s stake rose to 82.48%; and second, a €55 million inflow for the participation of Hofer KG (Austria) in the capital increase of Aldi Hellas Supermarket LP. Residents’ direct investment abroad recorded a net outflow of €45 million. The most important transaction in this category concerned a €59 million outflow for the participation of Eurobank in the capital increase of Bank Post SA (Romania).

 Under portfolio investment, a net inflow of €11.9 billion was observed, reflecting a €11.3 billion increase (inflow) in non-residents’ investment in Greek bonds and Treasury bills and a €0.6 billion decline (inflow) in residents’ purchases of foreign bonds and Treasury bills.

Under “other” investment, a considerable net outflow of €9.9 billion was recorded, which mainly reflects a €9.2 billion decrease (outflow) in non-resident credit institutions’ and institutional investors’ deposit and repo holdings in Greece and a €0.5 billion increase (outflow) in residents’ corresponding deposit and repo holdings abroad.

In January-May 2009, direct investment showed a net inflow of €1.2 billion. Specifically, net inflows of non-residents’ funds for direct investment in Greece came to €1,554 million, while net outflows of residents’ funds for direct investment abroad reached €389 million.

During the same period, a net inflow of €19.8 billion was observed under portfolio investment. Specifically, there was an inflow of funds for non-residents’ purchases of Greek government bonds and Treasury bills (of €17.2 billion). There was also an inflow owing to a €3.2 billion decrease in residents’ investment in foreign bonds and Treasury bills.

Finally, under “other” investment, a net outflow of €8.9 billion reflects a €8.7 billion increase (outflow) in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad and a €2.0 billion outflow for the repayment of loans granted by non-residents to both the public and the private sector. These developments more than offset the inflow recorded due to a €1.9 billion rise in non-resident credit institutions’ and institutional investors’ deposit and repo holdings in Greece

 At end-May 2009, Greece’s reserve assets stood at €2.8 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 2009 will be released on 18 August 2009.

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