Greece's current accounts deficit fell by 2.0 billion euros, or 29.7 pct in the first two months of 2011, compared with the same period last year, to 4.7 billion euros, while the deficit fell by 38 pct in February 2011 compared with the same month in 2010, the Bank of Greece said on Wednesday. 

The account deficit decreased substantially to 1.959 billion euros in February, from 3.159 billion in February 2010. This narrowing in the deficit reflects primarily a considerable increase of 1.091 billion euros in the current transfer receipts of general government (mainly from the EU) and, secondarily, a 237 million euros decline in non-oil imports, a 142 million rise in exports of goods excluding oil and ships, and an 82 million decrease in net payments for interest, dividends and profits.

These developments more than offset a 322 million rise in the net oil import bill, the central bank said in a report.  The improvement in the trade deficit excluding oil and ships reflects the continued recovery of export receipts in this category (up by 17.2%) and a decrease in the corresponding import bill by 5.5%. 

The surplus of the services balance remained virtually unchanged, as the small rise in net transport receipts and the decrease in net payments for “other” services were offset by the fact that net travel payments reached 15 million euros in February 2011, compared with net receipts of 16 million euros in February 2010.

Transport receipts (mainly from merchant shipping) fell by 4.1%, while the corresponding payments declined by 8.0%.  The income account deficit dropped by 78 million euros, or 11.2%, as net payments for interest, dividends and profits fell by 11.9%. 

Finally, the current transfers balance showed a surplus of 669 million euros, compared with a deficit of 383 million in February 2010, chiefly as a result of increased general government receipts from the EU, concerning direct aid and subsidies under the Common Agricultural Policy. 

In the January-February 2011 period, the current account deficit fell by 2.0 billion euros, or 29.7% year-on-year, to 4.7 billion. This development reflects primarily a large increase of 2.1 billion euros in the current transfer receipts of general government (mainly from the EU) and, secondarily, a 504 million decline in the non-oil import bill, a 453 million rise in receipts from overall exports of goods and a €80 million decrease in net payments for interest, dividends and profits. 
In particular, the overall trade deficit grew by 113 million euros, as a result of a 921 million increase in the net oil import bill, whereas net payments for purchases of ships dropped by 171 million and the trade deficit excluding oil and ships shrank by 637 million. Receipts from exports of goods excluding oil and ships rose by 15.7%, while the corresponding import bill declined by 8.4%. 

The 42 million euros increase in the surplus of the services balance reflects lower net payments for “other” services, which offset a decrease in net transport receipts and a rise in net travel payments. It should be noted that gross transport receipts (chiefly from merchant shipping) and the corresponding payments both fell slightly by 3.2%; as a result, net receipts dropped by 32 million. Moreover, travel spending in Greece by non-residents grew by 6.1%, while travel spending by residents abroad rose by 11.6%. As a result, net travel payments increased by 21 million euros.
The income account deficit shrank by 70 million euros year-on-year, mainly reflecting lower net payments for interest, dividends and profits (down by 6.3%).  Finally, the current transfers balance showed a surplus of 1.358 billion euros, compared with a deficit of 651 million in the same period of 2010, mainly as a result of the aforementioned increase in EU transfers to general government.

Capital transfers balance

In February 2011, the capital transfers balance showed a surplus of 338 million euros, up by 244 million year-on-year, due to the implementation of projects under the National Strategic Reference Framework. In the January-February 2011 period, the capital transfers balance showed a surplus of 326 million, compared with 126 million in the corresponding period of 2010. This mostly reflects a rise in EU capital transfers to general government.

The overall transfers balance (current transfers plus capital transfers) recorded a surplus of 1.684 billion euros, compared with a deficit of 524 million in the corresponding period of 2010, reflecting the above-mentioned development in EU current transfers.  In February 2011, the deficit of the combined current account and capital transfers balance reached 1.6 billion euros, compared with 3.1 billion in February 2010. In the January-February 2011 period, the deficit of the combined current account and capital transfers balance came to 4.4 billion euros, compared with 6.6 billion in the corresponding period of 2010 (down by 33.3%).

Financial account balance

In February 2011, non-residents’ direct investment in Greece showed a net inflow of 23 million. The most important transaction concerned (a) a 43 million inflow for the participation of Cosco Pacific Limited (Hong Kong) in the share capital increase of Piraeus Container Terminal SA; and (b) a 30 million inflow for the participation of Velti Plc (United Kingdom) in the capital increase of its subsidiary “Velti Software and Related Products and Services SA”. Residents’ direct investment abroad recorded a net outflow of 141 million.

The most remarkable transaction under this category concerned an outflow of 101 million by EFG Eurobank Ergasias SA for the endowment of its branch EFG Eurobank Ergasias SA Spolka (Poland).
Under portfolio investment, a net inflow of 796 million was recorded, reflecting a 1.7 billion decrease in residents’ investment in foreign bonds and Treasury bills (inflow). This development was partly offset by a 1.0 billion decrease in non-residents’ investment in Greek bonds and Treasury bills (outflow). At end-February 2011, Greece's reserve assets stood at 4.75 billion euros.