External transactions-Fourth quarter 1999 and January-December 1999
09/06/2000 - Press Releases
Fourth quarter 1999
The current account deficit rose to 2,179 million euro in the fourth
quarter of 1999, compared with 537 million euro in the corresponding period of 1998. The
deficit increase stemmed from both a rise (of 1,405 million euro) in the trade deficit and
a reduction (of 638 million euro) in the surplus for transfers, whereas both the incomes
and the services balances improved, to a certain degree.
The trade deficit growth resulted from an increase in both the non-oil
trade deficit and the net oil import bill. Receipts from travel, transportation and other
services increased and so did, to a lesser extent, corresponding payments. As a result,
the services surplus grew by 247 million euro. Compared with the fourth quarter of 1998,
the incomes deficit was reduced, thanks to increased inflows and despite the rise in
payments for interest, dividends and profits. Finally, the decrease in the surplus for
transfers was due to a reduction in EU transfers and emigrants’ remittances, together
with an increase in payments.
The financial account balance recorded a net inflow for portfolio and
“other” investment in the fourth quarter of 1999, whereas direct investment showed a
As a result of these developments, foreign exchange reserves decreased
by about $3 billion during the fourth quarter of 1999.
January – December 1999
The current account deficit rose to 4,808 million euro in 1999 from
3,286 million euro in 1998, mainly owing to the increase in the trade deficit and the
reduction in the transfers surplus. By contrast, the services surplus increased
considerably and the incomes deficit was reduced to about half the 1998 level.
These developments were affected chiefly by the fast rate of GDP
growth, quicker than that for Greece’s main trading partners, and, to a lesser extent,
by the rise in international crude oil prices. The trade balance was additionally burdened
by excessive passenger car imports, following a tax-reduction scheme aimed at curbing
inflation, as well as by the high rate of growth of both investment activity and private
consumption. Export receipts increased substantially, despite the slowdown of economic
activity in most of the country’s trading partners and hence the slower growth of
foreign demand. The main factors behind the improved performance of services and incomes
during the period under consideration were the rise in real incomes in EU countries,
moderate increases in domestic tourist prices, the fact that conditions in international
freight markets returned to normal, and the increase in incomes from residents’
The 2,069 million euro increase in the trade deficit reflects the rise
in both the non-oil trade deficit, attributable to the growth of the import bill which
more than offset increased export receipts, and the net oil import bill. As regards the
balance for services, the increase in travel and transportation receipts exceeded by far
the growth of corresponding payments, leading to a 774 million euro increase in the
relevant surplus. The incomes deficit was reduced by 755 million euro, mainly because of
the rise in inflows from interest, dividends and profits, which more than offset the rise
in corresponding payments, and also because of the increase in inflows reflecting
compensation of employees. Finally, the surplus for transfers was reduced by 982 million
euro, chiefly owing to smaller inflows of emigrants’ remittances and, to a lesser
extent, of EU transfers.
The main factors underlying financial account developments during 1999
were the reduction in the public sector borrowing requirement and the increase in
residents’ investment activity abroad, mainly in the Balkan countries. As regards net
foreign direct investment, inflows barely exceeded outflows, while the net inflow for
portfolio investment fell to 5,706 million euro, compared with 10,700 million euro in
1998. This inflow concerned purchases of Greek government bonds and was partly offset by
an outflow due to sales of stocks, mainly during the second half of 1999. Finally,
“other investment” recorded a net outflow, much smaller than in 1998, owing to the
considerable reduction in net borrowing by general government.
As a result of these developments, foreign exchange reserves rose to
$18.9 billion at the end of 1999, compared with $18.2 billion at end-1998.