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Balance of Payments: JULY 2004

17/09/2004 - Press Releases

Current account balance

In July 2004, the current account surplus grew considerably over the same month both in 2002 and in 2003. The substantial year-on-year increase in the current account surplus in July 2004 is mainly accounted for by a rise in both the transfers and the services surplus and - to a much lesser extent - by a decrease in the income account deficit. By contrast, the trade deficit grew.

Specifically, underlying the widening of the trade deficit were an increase in the non-oil trade deficit and, secondarily, a rise in the net oil import bill. The services surplus improved considerably, mainly as a result of the growth of net transport receipts (mainly from shipping), as well as a decline in net payments for ''other'' services. By contrast, net travel receipts fell. The income account deficit narrowed owing to a drop in net interest, dividend and profit payments. Finally, the growth of the transfers surplus in July reflects an increase in net EU transfers to general government.

In January-July 2004, the current account deficit narrowed considerably (by €1,295 million) over the same period of 2003 and reached €4,480 million. This development mainly reflects a substantial rise in the services surplus and, secondarily, an increase in the transfers surplus, as well as a small decline in the income account deficit, all of which together more than offset the considerable widening of the trade deficit (which grew by €1,124 million relative to the same period of 2003). Specifically, a €1,916 million (or 11.7%) increase in the non-oil import bill more than offset both a €739 million (or 13.2%) rise in non-oil export receipts and a small decrease (of €53 million) in the net oil import bill. The services surplus grew by €1,859 million owing to a big rise (of €1,681 million) in net transport receipts (mainly from shipping) and, to a much lesser extent, a drop in net payments for ''other services'', while net travel receipts remained virtually unchanged. Finally, the €516 million growth of the transfers surplus is accounted for by a €486 million increase in net EU transfers to general government, largely stemming from high inflows in February and July.

Financial account balance

In July 2004, a net inflow of €89 million was recorded under direct investment. The most important direct investment in Greece by non-residents was the acquisition of ''Delta Singular Outsourcing Services'' (a subsidiary of ''Delta Singular S.A.'') by the US company ''First Data'' (€206 million). Under portfolio investment, a net inflow of €1,275 million mainly reflects the fact that non-residents' purchases of Greek government bonds exceeded residents' purchases of bonds issued by non-residents. Finally, as regards "other investment", a net outflow of €1,230 million resulted from an increase in residents' claims on non-residents (mainly an increase in credit institutions' and institutional investors' deposits and repos abroad), as well as a decrease in residents' liabilities vis-a-vis non-residents.

In January-July 2004, non-residents' direct investment in Greece reached €748 million, while residents' direct investment abroad came to €312 million, resulting in a net inflow of €435 million under direct investment. Over the same period, a substantial net inflow of €6,846 million was recorded under portfolio investment, mainly reflecting non-residents' purchases of Greek government bonds (€12,132 million), which more than offset residents' purchases of foreign bonds (€6,560 million). Finally, a net outflow of €3,068 million under ''other investment'' is largely associated with domestic credit institutions' sizeable outflows (of €7,495 million) to deposits and repos abroad and, to a lesser extent, outflows (of €854 million) for the repayment of loans granted by non-residents, which more than offset non-residents' inflows to deposits and repos (€5,319 million).

At end-July 2004, Greece's reserve assets came to €3.5 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" with 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 August 2004 will be released on 19 October 2004.

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