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Balance of payments: NOVEMBER 2004

20/01/2005 - Press Releases

Current account balance

In November 2004, the current account deficit grew by €116 million over the same month of 2003. This development is due to the substantial increase in the trade deficit, which was largely offset by a rise in the services and the transfers surplus. There was no significant change in the income account balance.

Specifically, the widening of the trade deficit is mainly accounted for by an increase in the non-oil trade deficit, while the net oil import bill also rose. The services surplus improved considerably, as a result of an increase in net transport receipts, while net travel receipts remained virtually unchanged and net payments for ''other'' services grew. Finally, the year-on-year rise in the transfers surplus mainly reflects increased net EU transfers to general government, while the net receipts of the other sectors (emigrants' remittances etc.) declined slightly.

In January-November 2004, the current account deficit came to €5,084 million, showing a considerable improvement (by €1,972 million) over that of the corresponding period of 2003. 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 €2,664 million relative to the same period of 2003. Specifically, a €3,252 million (or 12.7%) increase in the non-oil import bill more than offset a €1,113 million (or 12.5%) rise in non-oil export receipts, whereas the net oil import bill increased by €525 million.

By contrast, developments in the services surplus were particularly favourable. The surplus grew by €3,712 million, largely owing to a very strong rise (of €2,661 million) in net transport receipts (mainly from shipping) (gross transport receipts grew by €3,495 million or 40.6%) and a €712 million increase in net travel receipts (it should be noted that gross travel receipts rose by €845 million or 9.1%). Also, the deficit in the ''other'' services account dropped considerably over the same period of 2003.

Finally, the €836 million year-on-year growth of the transfers surplus is accounted for by a €1,121 million increase in general government receipts (mainly EU transfers), which far exceeded the €180 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

In November 2004, no remarkable flows were recorded under direct investment. Under portfolio investment, there was an inflow of non-residents' funds (amounting to €843 million) mainly for purchases of Greek companies' shares (non-resident institutional investors' purchases of National Bank of Greece shares, in the context of the sale of 7.9% of that bank's share capital by the Greek government), while inflows of non-residents' funds for the purchase of Greek government securities were relatively small. These inflows were more than offset by outflows of residents' funds, mainly for purchases of bonds issued by non-residents. Finally, as regards "other'' investment, a substantial inflow of non-residents' funds was recorded, mainly to deposits and repos. This inflow was offset, by around one third, by outflows of domestic credit institutions' and institutional investors' funds to deposits and repos abroad.

In January-November 2004, non-residents' direct investment in Greece reached €1,014 million, while residents' direct investment abroad came to €450 million. (It should be recalled that the most important direct investments by non-residents in the January-November 2004 period were the acquisition of PANAFON S.A. by VODAFONE, which was partly effected in 2003 and completed in January and February 2004; the acquisition of the General Bank of Greece by Societe Generale in March; the acquisition of DELTA SINGULAR OUTSOURCING SERVICES by the US company FIRST DATA in July; the increase in PANEUROPEAN OIL AND INDUSTRIAL HOLDINGS S.A.'s participation in the 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 €10,484 million was recorded under portfolio investment, as outflows of residents' funds (mainly for the purchase of bonds abroad, amounting to €9,427 million) were more than offset by inflows of non-residents' funds (mainly for purchases of Greek government bonds, amounting to €17,361 million). Finally, a net outflow of €6,735 million under ''other'' investment is largely associated with sizeable outflows of domestic credit institutions' funds (amounting to €11,362 million) to deposits and repos abroad and - to a lesser extent - outflows (of €1,712 million) for the repayment of loans granted to residents by non-residents (of which €805 million for the repayment of general government loans). These outflows more than offset inflows of non-residents' funds to deposits and repos in Greece (€6,301 million).

At end-November 2004, Greece's reserve assets came to €2.7 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 December 2004 will be released on 18 February 2005.

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