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Balance of payments: JANUARY - AUGUST 2000

17/11/2000 - Press Releases

Current Account Balance

The current account recorded a deficit of EUR 344 million in the July-August 2000 period, compared with a surplus of EUR 163 million in the corresponding period of 1999. This development is largely due to increases in both the trade deficit and, to a much lesser extent, the incomes deficit, while the surplus of current transfers declined. By contrast, the services surplus increased significantly.

The increase in the trade deficit results from the growth of non-oil imports, which more than offset the growth of non-oil export receipts, as well as from increased net oil imports. On the other hand, the improvement in the balance of services reflects higher net travel and transportation inflows. The small rise in the incomes deficit is due to larger net outflows of investment income (interest, dividends and profits payments). Finally, the smaller transfers surplus mainly reflects lower net EU transfers in the July-August 2000 period compared with the corresponding period of 1999.

In the January-August 2000 period, the current account deficit rose to EUR 4,618 million, from EUR 2,256 million in the corresponding period of 1999. It should be noted that almost 41% of this rise is due to increased expenditure for net oil imports, mainly as a result of developments in world crude oil prices and higher oil import volumes in the first few months of 2000. The non-oil trade deficit also rose significantly, given that the growth rate of export proceeds, which finance less than one third of import payments, is lower compared to that of imports. Increased import expenditure is chiefly associated with imports of passenger cars, as well as of machinery and capital equipment, and reflects increased investment activity and an increase in disposable income.

The improved balance on services is mainly attributed to an increase in net receipts from transportation services, reflecting favourable developments in the international sea freight market and improved recording of the relevant data by the commercial banks under the new balance-of-payments compilation system. Moreover, the rise in travel receipts has been largely offset by a rise in travel payments. It should be recalled, however, that the latter have always included expenditure on education and medical care. The increase in the incomes deficit is for the most part due to larger outflows related to interest, dividends and profits, which more than offset a rise in the respective inflows. Finally, the higher surplus on transfers during the first eight months of the year is chiefly due to a rise in net EU transfers and, to a lesser extent, in emigrants’ remittances.

Financial account balance

Regarding developments in the financial account balance, both over the July-August period and over the first eight months of the year, net outflows were recorded in each of the "direct investment" and “other investment” components, while portfolio investment showed a net inflow. Net direct investment inflows reflect the fact that between January and August 2000 foreign investment by residents outgrew non-residents' investment by about four times, the latter remaining broadly unchanged at last year's levels. Portfolio investment increased over the first eight months of the year compared to the corresponding period of 1999, owing to higher portfolio investment by non-residents, while portfolio investment outflows by residents remained broadly unchanged. Increased net outflows for “other investment” resulted mainly from a significant decrease in deposits held by non-residents (notably credit institutions) with domestic credit institutions, which relates to the gradual convergence of drachma interest rates towards the corresponding euro rates.

As a result of the above developments in the current and the financial account balances, Greece's foreign exchange reserves amounted to USD 15.4 billion (EUR 17.2 billion) at end-August 2000. According to the latest available data, foreign exchange reserves reached USD 14.9 billion by the end of October.

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