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Balance of Payments: JANUARY - OCTOBER 2000

08/01/2001 - Press Releases

Current account balance

In the September-October 2000 period, the current account deficit increased by 683 million euro against that of the corresponding period of the previous year and stood at 1,508 million euro. This resulted from the increase mainly in the trade deficit and, to a much lesser degree, in the income account deficit, while the current transfers surplus decreased considerably. By contrast, there was a large increase in the services surplus.

The increase in the trade deficit in this period (compared with the corresponding period of 1999) stemmed from the growth in the non-oil deficit (by 482 million euro) and in the net imports of oil (by 263 million euro). It should be noted that, although non-oil export receipts grew much faster than the import bill (40 per cent against 24 per cent), the deficit widened, as the import bill was more than three times as high as the export bill. The increase in the import bill stemmed mainly from payments for the import of electronic appliances, vehicles, machinery, sea-vessels and iron and steel products. As regards the services balance, the improvement was derived from increases in net receipts from travel and, mainly, transportation services. Besides, the growth in the income account deficit is attributable to the increase in net payments for interest, dividends and profits. Finally, the decrease in the current transfers surplus mostly reflects the considerable decline in net EU transfers in the September-October 2000 period, compared with the corresponding 1999 period. This development was due to the delayed absorption of the remaining funds from the Second Community Support Framework (CSF) and of advance payments from the Third CSF.

In the January-October 2000 period, the current account deficit came to 6,127 million euro, against a 3,082 million drachma deficit in the corresponding 1999 period. About 40 per cent of the increase in the deficit is attributable to the growth in the net oil import bill, mainly caused by the evolution of the world price of crude oil, but also by the increased volume of oil imports in the first months of 2000. At the same time, the non-oil trade deficit also increased considerably, despite the fast growth of export receipts. The large rise in the import bill mainly regards imports of passenger cars, but also of machinery and other capital goods and reflects increased investment activity and the faster growth of disposable income.

The improvement of the services balance stemmed mostly from the increase in net receipts from transportation services, a fact linked, on the one hand, to favourable developments in the international sea-trade market and, on the other hand, to the more accurate recording of shipping companies’ income. At the same time, about 3/4 of the increase in travel receipts were offset by an increase in travel payments, which, however, in recent years include a larger share of expenditure for studies abroad, medical care etc. The increase in the income account deficit was related to the rise in net payments for interest, dividends and profits. Finally, current transfers showed an increased surplus, reflecting the rise mainly in net EU transfers in the January-October 2000 period ( these transfers, however, decreased considerably in the last two months of that period) and, to a lesser degree, in emigrants’ remittances.

Financial account balance

As regards the financial account balance, all three major categories of investment recorded net inflows in the September – October 2000 period. By contrast, in the January-October period, a net outflow was observed in direct investment and “other investment”, while only portfolio investment registered a net inflow. In particular, net outflows for direct investment resulted from the fact that residents' investment abroad exceeded investment of non-residents in Greece by 1.4 billion euro. The net inflow for portfolio investment in the period under review was 2.7 billion euro higher than that in the corresponding 1999 period and concerned non-residents’ investment mainly in bonds and, to a lesser degree, in equity. Net outflows for “other investment” were mainly due to the considerable decrease in non-residents’ deposits in Greece and to the increase in residents’ deposits abroad. These movements regarded deposits of credit institutions and were connected to the gradual convergence of drachma interest rates towards the interest rates of euro area currencies. It should be noted that, while in the January-October 1999 period the net liabilities of the general government grew by 1.1 billion euro (owing to borrowing), in the corresponding 2000 period they fell by 0.3 billion euro, because repayments overshot new borrowing.

As a result of the above current account and financial account developments, the country’s foreign exchange reserves came to 14.9 billion US dollars (17.7 billion euro) at the end of October 2000. Moreover, on the basis of the latest available data, Greece's foreign exchange reserves amounted to 15.3 billion US dollars at the end of November 2000.

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