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Balance of payments: OCTOBER 2004

17/12/2004 - Press Releases

In October 2004, the current account deficit was smaller by €39 million compared with the corresponding month of 2003. This improvement is mainly accounted for by an increase in the services surplus and - to a lesser extent - by a decline in the income account deficit. By contrast, the transfers surplus narrowed and the trade deficit grew slightly.

Specifically, underlying the small widening of the trade deficit was an increase in the non-oil trade deficit, while the net oil import bill decreased. The services surplus improved considerably, mainly as a result of an increase in net transport receipts, while net travel receipts increased slightly and receipts from ''other services'' declined. The income account deficit narrowed owing to a decline in net interest, dividend and profit payments. Finally, the year-on-year decline in the transfers surplus reflects the fact that the increase in EU transfers to general government was more than offset by a rise in general government payments to the EU and a decrease in the receipts of the other sectors (emigrants' remittances etc.).

In January-October 2004, the current account deficit narrowed considerably (by €2,088 million) over the corresponding period of 2003 and came down to €3,716 million. This development mainly reflects a substantial rise in the services surplus, an increase in the transfers surplus, as well as a small decrease in the income account deficit, which more than offset a strong rise in the trade deficit.

The trade deficit grew by €2,139 million relative to the corresponding period of 2003. Specifically, a €2,640 million (or 11.3%) increase in the non-oil import bill more than offset a €936 million (or 11.6%) rise in non-oil export receipts, whereas the net oil import bill increased by €435 million.

By contrast, developments in the services account were very favourable, as already noted; the services surplus grew by €3,472 million (or 32.3%), mainly owing to a very large rise (of €2,404 million) in net transport receipts (mainly from shipping) (gross transport receipts grew by €3,178 million or 40.9%) and, to a lesser extent, a €704 million increase in net travel receipts (it should be noted that gross travel receipts rose by €847 million or 9.4%). The deficit in the ''other'' services account virtually came to zero (in comparison with a deficit of €368 million in the corresponding period of 2003).

Finally, the €662 million (or 15.2%) year-on-year growth of the transfers surplus is accounted for by a €1,071 million (or 25.2%) increase in general government receipts (mainly transfers from the EU), which far exceeded the €313 million rise in general government payments (mainly to the EU), whereas the net receipts of the ''other'' sectors (mainly emigrants' remittances) declined.

Financial account balance

No remarkable flows were recorded under direct investment in October 2004, whereas in the corresponding month of the previous year a substantial inflow of non-residents' funds had been observed under this category. Under portfolio investment there was an inflow of non-residents' funds mainly for purchases of Greek companies' shares and Greek government securities; approximately half of this inflow was offset by the outflow of residents' funds mainly for purchases of bonds issued by non-residents. Finally, as regards "other'' investment, there was an outflow of residents' funds, which reflected domestic credit institutions' and institutional investors' investment in deposits and repos abroad. This outflow was largely offset by the inflow of non-residents' funds mainly to deposits and repos in Greece.

In January-October 2004, non-residents' direct investment in Greece reached €1,044 million, while residents' direct investment abroad came to €431 million. (It should be recalled that the most important direct investments in Greece by non-residents over the first ten months of 2004 regarded the acquisition of PANAFON Hellenic Telecommunications Company S.A. by VODAFONE, which had taken place partly in 2003 and was completed in January and February of the current year, the acquisition of Geniki Trapeza by Societe Generale in March, the acquisition of DELTA SINGULAR OUTSOURCING SERVICES by the US company FIRST DATA in July, the increase in the participation of PANEUROPEAN OIL AND INDUSTRIAL HOLDINGS S.A. in the share capital of Hellenic Petroleum S.A. in August and the acquisition of KOTSOVOLOS S.A. by DIXONS in September.) Over the same period, a substantial net inflow of €11,690 million was recorded under portfolio investment, as the outflow of residents' funds for investment abroad (mainly for purchases of bonds, of €7,518 million) was more than offset by the inflow of non-residents' funds for investment in Greece (mainly for purchases of Greek government bonds, of €17,039 million). Finally, a net outflow of €8,721 million under ''other'' investment is largely associated with the sizeable outflow of domestic credit institutions' funds (of €10,326 million) to deposits and repos abroad and - to a lesser extent - with outflows (of €1,418 million) for the repayment of loans granted to residents by non-residents. These outflows more than offset the inflow of non-residents' funds to deposits and repos in Greece (€2,978 million).

At end-October 2004, Greece's reserve assets came to €3.0 billion. (It should be recalled that since the first months of 2003 the Bank of Greece has started to diversify its portfolio, by reducing its non-euro area currency holdings, which are included in reserve assets, and by increasing its higher-yield or euro-denominated assets - mainly bonds issued by euro area Member States, which are not included in reserve assets. Given that there is less need to maintain high foreign currency reserves, by the above diversification the Bank of Greece has improved the return on its investments. It has been noted repeatedly 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 in 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 November 2004 will be released on 20 January 2004.

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