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Balance of payments MARCH 2005

24/05/2005 - Press Releases

Current account balance

In March 2005, the current account showed a deficit of €1,820 million, i.e. it rose by €838 million year-on-year. This development is due to unfavourable developments in all the balances, notably a large decline in the transfers surplus and a considerable increase in the income account deficit.

Specifically, underlying the widening of the trade deficit was mainly a substantial rise in net payments for the purchase of ocean-going vessels and, secondarily, an increase in the net oil import bill. By contrast, the trade deficit excluding oil and ships narrowed. The services surplus decreased mainly owing to a worsening in the "other" services balance, which recorded a deficit, compared with a small surplus in March 2004. A small decline was also observed in net travel receipts, as gross receipts (i.e. non-residents' travel expenses in Greece) increased less than gross payments (i.e. residents' travel expenses abroad). Besides, both gross and net transport receipts remained virtually unchanged in comparison with their high level in March 2004. The income account deficit grew substantially, mainly as a result of an increase in interest payments on Greek Government bonds and loans over March 2004. Finally, the year-on-year decline in the transfers surplus mainly reflects a decrease in net EU transfers to general government, while the net receipts of the other sectors (emigrants' remittances etc.) also fell.

In the January-March 2005 period, the current account deficit rose considerably (by €1,651 million) over the same period of 2004 and reached €3,829 million. This development reflects an increase in the trade deficit, a narrowing of the transfers surplus and a rise in the income account deficit. By contrast, the services surplus grew during the same period, but not enough to offset the unfavourable developments in the other balances.

The trade deficit increased by €723 million year-on-year. Specifically, the breakdown of receipts and payments shows that the non-oil balance has been affected considerably by purchases and sales of ocean-going vessels. In particular, in the first quarter if 2005, receipts from sales of ships reached €500 million (compared with €188 million in the same period of 2004), while payments for the purchase of ships came to €841 million (from €55 million). At the same time, the net oil import bill rose by €275 million. By contrast, it should be pointed out that the trade deficit excluding oil and ships was virtually unchanged; indeed, it narrowed by €26 million, reflecting the fact that the €113 million decline in export receipts excluding oil and ships was smaller than the €139 million decrease in the import bill excluding oil and ships.

The services surplus grew by €113 million, owing to a further rise in net transport (mainly shipping) receipts (by €270 million compared with the high level of the first quarter of 2004). Gross travel receipts rose by 18.2%, but gross payments increased by 31.2%; as a result, net travel receipts declined. Furthermore, net payments for ''other'' services rose. Over the same period, the income account deficit widened by €379 million owing to increased interest, dividend and profit payments.

Finally, a €662 million year-on-year decline in the transfers surplus is mainly accounted for by a decrease in EU transfers to general government and, to a lesser extent, a fall in the net receipts of the "other" sectors.

Financial account balance

In March 2005, financial flows under residents' direct investment abroad and non-residents' direct investment in Greece were relatively small. Under portfolio investment, a net outflow of €2,131 million was mainly accounted for by residents' investment in bonds issued by non-residents. As regards "other investment", a substantial inflow of non-residents' funds was observed, mainly to deposits and repos, and, at the same time, a large inflow was recorded owing to a decline in resident credit institutions' and institutional investors' deposits and repo holdings abroad.

In January-March 2005, net direct investment showed a €30 million outflow, compared with a €525 million inflow in the same period of 2004. This development is accounted for by the fact that residents' direct investment abroad came to €239 million, while non-residents' direct investment in Greece reached €209 million. Over the same period, a net outflow of €1,014 million was recorded under portfolio investment, as outflows of residents' funds for investment abroad (mainly purchases of bonds, of €5,815 million) more than offset inflows of non-residents' funds for investment in Greece (mainly purchases of Greek government bonds and shares of Greek firms, of €4,408 and €1,075 million respectively). Finally, a net inflow of €4,464 million under ''other'' investment is mainly associated with substantial inflows of non-residents' funds to deposits and repos in Greece (of €12,639), which were partly offset by outflows of residents' funds (of €7,776 million) to deposits and repos abroad and also by outflows (of €393 million) for the repayment of loans granted to residents by non-residents (including repayment of general government loans of €248 million).

At end-March 2005, Greece's reserve assets came to €1.8 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 increasing its assets which have higher yields and are mainly denominated in euro - predominantly bonds issued by euro area Member States, which are not included in reserve assets. 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 April 2005 will be released on 23 June 2005.

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