Press Releases

Balance of payments DECEMBER 2003

19/02/2004 - Press Releases

Current account balance

In December 2003, the current account deficit remained virtually the same year-on-year. The favourable developments in the services and transfers balances almost fully offset the rise in the trade deficit, while the income account deficit was almost unchanged.

In particular, non-oil export receipts improved. However, the remarkable growth of the non-oil import bill, as well as the small increase in the net oil import bill, eventually led to a widening of the trade deficit. The rise in the services surplus stemmed from the growth of net transport receipts, while net travel receipts remained virtually unchanged. It should be noted that the December 2003 travel receipts and payments data are comparable year-on-year and are derived from a border survey. Finally, the increase in the transfers surplus mainly reflects a rise in net EU transfers to general government.

In the year 2003, the current account deficit rose only slightly (by €76 million) in comparison with 2002, to reach €8,648 million, hence falling to 5.7% of GDP (from 6.1% in 2002). It should be noted that both the total trade deficit and the non-oil trade deficit fell. In particular, as a result of a €521 million increase in non-oil export receipts and a €75 million decline in the non-oil import bill, the non-oil trade deficit decreased by €596 million. However, the fall in the total trade deficit was visibly smaller, as the net oil import bill grew by €531 million. The services balance improved, as its surplus widened by €743 million, reflecting an improvement in net transport receipts, while net travel receipts decreased. (It should be recalled that the travel balance statistics for 2003 as a whole are not comparable with those for 2002 as a whole, since their compilation on the basis of the relevant border survey started in mid-May 2002.) The income account deficit grew by €524 million as a result of increased interest payments on Greek government bonds, owing to the continued rise in non-residents' holdings of such securities. Finally, underlying the €360 million reduction in the transfers surplus was a decline in net EU transfers to general government, which more than offset the growth of net transfers to other sectors.

Financial account balance

In December 2003, a substantial net inflow (of €1,144 million) was observed under direct investment. This development was associated with both an increase in non-residents' direct investment in Greece (mainly due to an inflow of funds for the acquisition of PANAFON S.A. by VODAFON) and a drop in residents' direct investment abroad (as a resident company reduced its holding in the capital of a subsidiary abroad). Under portfolio investment, a net inflow of €1,694 million mainly reflects an inflow of non-residents' funds for the purchase of Greek government bonds. Finally, as regards "other investment", a net outflow of €1,444 million was mainly connected with a decrease in non-residents' deposits and repo holdings in Greece.

In the year 2003, a net inflow of €545 million was observed under direct investment. Over the same period, a substantial net inflow of €12,334 million was recorded under portfolio investment, mainly - as already explained - owing to an inflow of non-residents' funds for the purchase of Greek government bonds. At the same time, residents' portfolio investment abroad grew notably. This mainly reflects the fact that, in the context of its portfolio restructuring, the Bank of Greece increased its investment in bonds issued by euro area Member States and reduced its holdings of non-euro area currencies, thus leading to an equal reduction in its reserve assets (which do not include claims in euro on euro area residents). Finally, under ''other investment'', a net outflow of €7,624 million was observed. Underlying this development were: first, residents' (mainly credit institutions') continued sizeable outflows to deposits and repos abroad, reflecting the increasing integration of money markets in the euro area; second, substantial loan (mainly general government loan) repayments.

At the end of 2003, Greece's reserve assets came to €4.6 billion. Already in the early months of 2003, the Bank of Greece diversified the composition of its reserve asset portfolio, by reducing its holdings of non-euro area currencies (mainly US dollars) and increasing its asset items that either offer higher yields or are denominated in euro (mainly bonds issued by euro area Member States, which are not included in the reserve assets). Since the need to maintain a high level o reserve assets has been reduced, the Bank of Greece in this way improved the return on its investments and reduced the risk of losses stemming from the continuing fall of the US dollar and the appreciation of the domestic currency, i.e. the euro. ((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 a ssets of the ECB.)

Note: Balance of payments data for January 2004 will be released on 19 March 2004.