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Balance of payments: FEBRUARY 2006

18/04/2006 - Press Releases

Current account balance

In February 2006, the current account deficit widened substantially year-on-year to €2,545 million. This development is attributable mainly to a narrowing of the current transfers surplus, but also to the growth of the trade deficit.

Underlying a considerable year-on-year rise (of €615 million) in the overall trade deficit in February was primarily a €427 million hike in the net oil import bill. At the same time, the trade deficit excluding oil and ships and the deficit of the ships' balance (sales minus purchases) widened by €151 million and €37 million respectively.

The overall surplus of the services balance declined by €50 million in comparison with February 2005, mainly as a result of a €42 million decrease in net transport receipts, while net payments for "other" services and net travel receipts showed little change.

A €57 million rise in the income account deficit was mainly accounted for by an increase in interest payments on Greek government bonds held by non-residents.

A more important change was recorded in the current transfers surplus, which narrowed by €691 million year-on-year, mainly as a result of a large decline (of €304 million) in gross current transfers from the EU in comparison with February 2005 and an even larger rise (of €404 million) in gross payments to the EU. (It should be recalled that current transfers from the EU mainly include receipts from the Guarantee Section of the European Agricultural Guidance and Guarantee Fund - EAGGF - in the context of the Common Agricultural Policy and receipts from the European Social Fund, while current transfers to the EU include Greece's contributions to the Community Budget.)

In January-February 2006, the current account deficit widened by €1,761 million over the same period of 2005 and reached €4,719 million, reflecting mainly a rise in the trade deficit.The growth of the current account deficit is also accounted for by a drop in the current transfers surplus, a narrowing of the services surplus and the growth of the income account deficit.

 A €1,024 million rise in the overall trade deficit (including oil and ships) is mainly due to a €629 million increase in the net oil import bill and, secondarily, to a widening of the deficits of the ships' balance and the other goods balance by €220 million and €175 million respectively. However, it should be pointed out that receipts from exports (excluding oil and ships) showed a remarkable increase (of €326 million or 23.3%), which, however, was more than offset by a rise (of €691 million or 15%) in the corresponding payments for imports.

The services surplus narrowed (by €229 million), as a result of a drop in net transport receipts, the fact that the travel services surpluses recorded in previous years turned into a small deficit, and a hike in net payments for "other" services. Specifically, gross travel receipts (i.e. travel spending in Greece by non-residents) dropped by €49 million (or 13%), while gross payments (i.e. travel spending abroad by residents) remained virtually unchanged. Gross transport receipts were higher by only €54 million or 2.4%, but gross transport payments rose by €184 million at the same time.

The income account deficit grew by €195 million, as net interest, dividend and profit payments increased, mainly owing to a continuing rise in non-residents' holdings of old and new issues of Greek Government bonds.

Finally, a €314 million fall in the current transfers surplus is attributable primarily to a €307 million drop in gross (mainly EU) current transfers to general government and a €95 million rise in general government gross current payments to the EU, while net current transfers to the other sectors (excluding general government) grew by €89 million.

Capital transfers balance

In February 2006, the capital transfers balance showed a surplus of €73 million, €612 million lower than in February 2005. (Capital transfers from the EU mainly include receipts from the Structural Funds - except for the European Social Fund - and the Cohesion Fund under the Community Support Framework.)

In January-February 2006, the capital transfers balance recorded a surplus of €108 million, down €579 million year-on-year. This reflects almost exclusively a decline in capital transfers from the EU to general government.

Combined current account and capital transfers balance (according to the old method of presentation)

The combined current account and capital transfers balances (according to the old method of presentation) showed a deficit of €2,472 million in February 2006, compared with a deficit of €446 million in February 2005. In January-February 2006, this deficit reached €4,611 million, compared with €2,271 million in the same period of 2005.

Financial account balance

In February 2006, a net inflow of €230 million was observed under direct investment. Residents' investment abroad showed a decline (net inflow) of €58 million, mainly associated with the sale of the subsidiary UNITEL LLC in Uzbekistan, owned by GERMANOS S.A. Under non-residents' direct investment in Greece, an inflow of €172 million was recorded. The most important investments under this category concerned the participation of AQUA NOVA INTERNATIONAL HOLDING BV (Netherlands) in the capital increase of its subsidiary EURODRIP S.A. and the acquisition of FRIGOGLASS S.A. by the Portuguese company SELENIS S.A. Under portfolio investment, a net outflow of €3,413 million was observed, reflecting on the one hand an increase in residents' investment in bonds, Treasury bills and shares issued by non-residents and, on the other hand, a decline in non-residents' holdings of Greek government bonds, which was only partly offset by a rise in non-residents' investment in shares of Greek firms. "Other" investment showed a net inflow of €5,627 million, mainly as a result of the growth of non-residents' increased deposit and repo holdings in Greece.

In January-February 2006, direct investment showed a net inflow of €364 million (compared with a net outflow of €58 million in the previous year). This development is mainly accounted for by a net inflow of €429 million for non-residents' direct investment in Greece. Under portfolio investment, a net outflow of €663 million was recorded, as residents' outflows for investment abroad (mainly in bonds) more than offset the inflow of non-residents' funds, mainly to Greek government securities, which decreased considerably year-on-year. Finally, under "other" investment, a net inflow of €4,653 million is mainly attributable to inflows of non-residents' funds (of €8,097 million), primarily to deposits and repos in Greece.

At end-February 2006, Greece's reserve assets came to €1.9 billion.

Note: Balance of payments data for March 2006 will be released on 24 May 2006.

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