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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 net outflow.

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’ investment abroad.

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.


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