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Balance of payments: MAY 2004

22/07/2004 - Press Releases

Current account balance

In May 2004, the current account deficit decreased year-on-year. Underlying this development was exclusively the widening of the services surplus, whereas the trade deficit and the income account deficit grew and the transfers surplus narrowed.

Specifically, the widening of the trade deficit is accounted for by an increase in the net oil import bill, while the non-oil import deficit was virtually unchanged. The services surplus improved considerably as a result of a rise in net transport (mainly shipping) receipts and, secondarily, an increase in net travel receipts. The growth of the income account deficit stemmed from higher net interest payments on Greek Government bonds. Finally, the narrowing of the transfers surplus reflects a decrease in net EU transfers to general government.

In January-May 2004, the current account deficit narrowed considerably (by €1,029 million) over the same period of 2003 and reached €4,038 million. This development mainly reflects a substantial rise in the services surplus and, to a lesser extent, an appreciable increase in the transfers surplus, which, together, more than offset the widening of the trade deficit and the income account deficit.

Specifically, the trade deficit grew by €660 million relative to the same period of 2003. This reflects a €1,296 million (or 11.4%) increase in the non-oil import bill, which more than offset both a €477 million (or 12.2%) rise in non-oil export receipts and a €160 million decrease in the net oil import bill. Besides, the services surplus grew by €1,384 million owing to a big rise (of €1,219 million) in net transport (mainly shipping) receipts and, to a much lesser extent, a drop in net payments for ''other services''. The income account deficit showed a small rise. Finally, the €371 million growth of the transfers surplus during the period under review is accounted for by a €368 million increase in net EU transfers to general government, which mainly stemmed from the inflows in February.

Financial account balance

In May 2004, a small net outflow was observed under direct investment. Under portfolio investment, a net outflow of €3,042 million mainly reflects residents' increased purchases of bonds issued by non-residents. Finally, as regards "other investment", a net inflow of €4,021 million largely reflects a decrease in residents' (credit institutions') deposits and repos abroad, as well as an increase in non-residents' deposits and repos in Greece.

In January-May 2004, a net inflow of €439 million was observed under direct investment, which mainly reflects the acquisition of PANAFON S.A. by VODAFONE in January and the acquisition of the General Bank of Greece by Societe Generale in March, as mentioned in earlier press releases. Over the same period, a substantial net inflow of €5,675 million was recorded under portfolio investment, mainly reflecting non-residents' purchases of Greek government bonds, which more than offset the corresponding outflows by residents to foreign bonds. Finally, a net outflow of €2,610 million under ''other investment'' is largely associated with residents' (mainly credit institutions') sizeable outflows to deposits and repos abroad and, to a lesser extent, outflows for the repayment of loans granted by non-residents, which more than offset non-residents' inflows to deposits and repos.

 At end-May 2004, Greece's reserve assets came to €3.4 billion. It should be noted that, as early as in the first months of 2003, the Bank of Greece diversified its portfolio, reducing its non-euro area currency holdings, which are included in reserve assets, and 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 improved the return on its investments. (It should be recalled 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 June 2004 will be released on 18 August 2004.

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