Greece’s current accounts balance showed a deficit of 1.998 billion euros in May, compared to a surplus of 308 million euros in May 2010, reflecting the high levels of EU transfers in that month of 2010, the Bank of Greece said on Friday.
The central bank, in a monthly report, said that the trade deficit remained almost unchanged, given that an improvement in the trade balance excluding oil and ships was offset by an increase in, mainly, the net oil import bill and, secondarily, net payments for purchases of ships. Specifically, export receipts excluding oil and ships rose at a high rate (20.3 percent) in May 2011, while the corresponding import bill showed no remarkable change (up by 1.6 percent).
The surplus of the services balance grew by 42 million euros as a result of lower net payments for “other” services and higher net travel receipts. In more detail, travel spending by non-residents in Greece grew by 9.8 percent in May year-on-year. By contrast, net transport receipts (chiefly from merchant shipping) fell by 22.6 percent, as gross receipts dropped by 10.1 percent, while the corresponding payments rose by 3.3 percent.
The income account deficit increased by 170 million euros as a result of a 162 million rise in net payments for interest, dividends and profits.
Finally, the current transfers balance showed a deficit of 137 million euros, compared with a surplus of 2.036 billion euros in May 2010, chiefly as a result of net general government payments of 129 million euros, against net receipts of 2.022 billion euros in May 2010. As already mentioned in previous press releases, the bulk of the funds allocated to general government under EU current transfers for the whole of 2011 was already absorbed during the first two months of 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-May 2011 period, the current account deficit fell by 586 million or 4.8 percent year-on-year, to 11.7 billion. This chiefly reflects a substantial decline of 2.0 billion euros in the non-oil trade deficit and a small rise in the services surplus, which more than offset a large rise in the net oil import bill, a widening of the income account deficit and a slight decrease in the current transfers surplus.
In more detail, the overall trade deficit decreased by 874 million euros, as a result of a €1.8 billion decline in the trade deficit excluding oil and ships and a 230 million drop in net payments for purchases of ships. By contrast, the net oil import bill rose by 1.2 billion euros. Most importantly, receipts from exports of goods excluding oil and ships rose by 17.4 percent, while the corresponding import bill declined by 8.9 percent.
A 79 million euros increase in the surplus of the services balance reflects lower net payments for “other” services and slightly higher net travel receipts, which more than offset a contraction in net transport receipts. Gross transport receipts (chiefly from merchant shipping) fell by 9.9 percent and the corresponding payments dropped by 9.4 percent; as a result, net receipts shrank by 291 million. Moreover, travel spending in Greece by non-residents grew by 5.6 percent year-on-year, while travel spending abroad by residents rose by 3.0 percent; as a result, net travel receipts grew by 64 million. According to data from the Bank of Greece’s border survey, in the January-May period non-resident travellers’ arrivals rose by 11.8 percent year-on-year.
The income account deficit rose by 316 million euros year-on-year, almost exclusively due to higher net payments for interest, dividends and profits (up by 9.2 percent).
Finally, the current transfers balance showed a surplus of 1.066 billion euros, down by 51 million compared with the corresponding period of 2010. This development is due to the fact that the balance of the “other” sectors (mainly emigrants’ remittances) turned to a deficit of 133 million euros, from a 29 million surplus in the first five months of 2010. By contrast, net current transfers to general government (mainly from the EU) rose by 111 million euros.

Capital transfers balance

In May 2011, the capital transfers balance showed a surplus of 16 million euros, compared with a deficit of 12 million in May 2010. (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 2011 period, the capital transfers balance showed a surplus of 321 million euros, compared with 147 million in the corresponding period of 2010. This rise mostly reflects a 183 million euros increase in net EU capital transfers to general government. The overall transfers balance (current transfers plus capital transfers) recorded a surplus of 1.387 billion euros, up by 123 million year-on-year, reflecting the above-mentioned development in EU current transfers.
Financial account balance
In May 2011, non-residents’ direct investment in Greece showed a net inflow of 286 million euros The most important transaction concerns an inflow of 400 million for the acquisition of Specifar Pharmaceuticals SA by Watson Pharmaceuticals Inc. (United States). Residents’ direct investment abroad recorded a net outflow of 59 million, without any remarkable transactions.
Under portfolio investment, a net outflow of 4.3 billion euros was recorded. Under “other” investment, a net inflow of 6.5 billion euros was recorded.
In the January-May 2011 period, direct investment showed a net outflow of 115 million euros (compared with a net inflow of 458 million in the corresponding period of 2010).
At end-May 2011, Greece’s reserve assets stood at 4.6 billion euros.