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Balance of payments: JULY 2007

19/09/2007 - Press Releases

Current account balance

In July 2007, the current account deficit grew by €1,868 million year-on-year, to reach €2,349 million, a level much higher than in the same month in previous years. This development reflects a considerable widening mainly of the trade deficit and, secondarily, of the income account deficit, which was offset to a small extent by the rise in the surplus of the current transfers balance. The surplus of the services balance remained almost unchanged.

The year-on-year increase of €1,765 million in the overall trade deficit is attributable to increases in the trade deficit excluding oil and ships, net payments for purchases of ships and the net oil import bill (of €832 million, €522 million and €412 million respectively). 

The overall surplus of the services balance remained virtually unchanged (up €36 million), as the considerable rise in net transport receipts and the small increase in net travel receipts were largely offset by an increase in net payments for other services. 

The substantial rise (of €384 million) in the income account deficit is exclusively attributable to higher net interest, dividend and profit payments. 

Finally, the surplus of the current transfers balance more than doubled year-on-year, because net EU transfers to general government grew. (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-July 2007, the current account deficit expanded by €4,196 million over the same period of 2006 and reached €19,021 million, reflecting the growth of, mainly, the trade deficit and, secondarily, the income account deficit, as well as - to a smaller extent- a decrease in the current transfers surplus. By contrast, the services surplus rose. 

The growth of the overall trade deficit by €3,069 million was mainly a result of increases in the trade deficit excluding oil and ships and in net payments for purchases of ships (of €1,918 million and €1,062 million respectively), while the net oil import bill rose by only €88 million. With respect to the trade balance excluding oil and ships, export receipts grew by €388 million or 5.9%, while the corresponding import bill rose by €2,306 million or 11.5%. 

The services surplus expanded by €590 million, reflecting a rise in, mainly, net transport receipts and, to a lesser extent, net travel receipts, while net payments for other services grew. It should be noted that gross transport receipts (mainly from merchant shipping) increased by 12.3% and gross travel receipts by 2.5%. 

The income account deficit rose by €1,290 million, mainly as a result of higher net interest, dividend and profit payments. This development is associated with a rise in non-residents'  holdings of public debt, as well as the increase in interest rates from end-2005 onwards.

Finally, underlying the decline of €428 million in the current transfers surplus were, mainly, lower (by €258 million) net receipts of the "other" sectors (i.e. excluding general government) and, secondarily, lower (by €170 million) net general government receipts from the EU. It should be noted that EU current transfers to general government rose by €52 million, but payments to the EU grew by €222 million.

Capital transfers balance 

In July 2007, the capital transfers balance showed a surplus of €153 million, compared with €495 million in July 2006. (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-July 2007, the capital transfers balance showed a surplus of €2,490 million, €488 million up year-on-year. This reflects a rise in EU capital transfers to general government. Thus, the overall transfers balance (current transfers plus capital transfers) recorded a surplus of €3,891 million, compared with €3,831 million in the same period of 2006.

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 €2,196 million in July 2007, compared with a small surplus of €13 million in the same month of 2006. In January-July 2007, this deficit came to €16,531 million, compared with €12,822 million in the same period of 2006.

Financial account balance

In July 2007, residents’ direct investment abroad came to €155 million. The most important investments concerned outflows of €17 million for the acquisition of UNITED MILK COMPANY (Bulgaria) by VIVARTIA S.A. and €15 million for the partial acquisition of LUIS HOTEL LTD (Cyprus) by E. KROMMYDAKIS HOTELS AND TOURISM S.A. During the same month, non-residents' investment in Greece came to €345 million. The most important investments concerned inflows of €169 million for the participation of ENDESA EUROPE (Spain) in the share capital increase of ENDESA HELLAS and €20 million for the participation of WIND (Netherlands) in the share capital increase of TELLAS S.A. Under portfolio investment, a net inflow of €2,222 million was recorded, which is attributable to the fact that residents' purchases of foreign bonds and Treasury bills (worth €1,260 million and €413 million respectively), as well as the €1,508 million decline in non-residents' holdings of Greek Treasury bills were more than offset by non-residents' purchases of shares of Greek firms and Greek government bonds (worth €2,271 million and €2,650 million respectively). "Other" investment recorded a net outflow of €447 million, mainly because the rise in resident credit institutions' deposit and repo holdings abroad offset an increase in non-resident credit institutions' corresponding investment in Greece.

In January-July 2007, direct investment showed a net outflow of €2,002 million. Specifically, net inflows of non-residents’ funds for direct investment in Greece came to €892 million, while net outflows of residents' funds for direct investment abroad reached €2,895 million. During the same period, a net inflow of €15,433 million was recorded under portfolio investment, as the inflow of non-residents' funds for investment in Greece (mainly in Greek government bonds and Treasury bills, of €16.5 billion, as well as in shares of Greek firms, of €8.5 billion) was considerably higher than the outflow of residents' funds for investment mainly in foreign bonds and Treasury bills (worth €8.4 billion), as well as in foreign shares (worth €691 million). Finally, under "other" investment, a net inflow of €3,073 million mainly reflects the fact that the inflow of non-residents' funds for investment in deposits and repos in Greece more than offset residents' investment in deposits and repos abroad and repayments of loans granted by non-residents to residents.

At end-July 2007, Greece's reserve assets reached €2.2 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 2007 will be released on 22 October 2007.

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