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Balance of payments: JULY 2002

01/10/2002 - Press Releases

Current account balance

In July 2002, the current account balance recorded a €565 million deficit, €203 million higher than in July 2001. This increase resulted mainly from the rise in the trade deficit and the fall in the transfers surplus. These developments were partly offset by the increase in the services surplus and the reduction in the income account deficit.

The widening of the trade deficit in comparison with July 2001 is almost equally attributable to the increase in the non-oil trade deficit (which was due to the fall in export receipts) and the rise in the net oil bill. Besides, the transfers surplus decreased, mainly due to the significant reduction (year-on-year) in net EU transfers in July 2002. On the other hand, the rise in the services surplus was a result of the growth of net receipts, mainly travel but also transport receipts. Finally, the income account deficit was reduced, owing to the fall in net payments for interest, dividends and profits.

During the January-July 2002 period, the current account deficit grew by €594 million, compared with the corresponding 2001 period, and stood at €4,952 million. This development reflects, first, the narrowing of the transfers surplus, second, the widening of the trade deficit, which was connected to a rise both in the non-oil trade deficit and the net oil bill, and, third, the increase –albeit small– in the income account deficit. These developments were only partly offset by the rise in the services surplus.

The non-oil trade deficit grew by €301 million(year-on-year) in the January-July 2002 period, as a result of reduced (by €402 million) export receipts; at the same time, however, the import bill also decreased (by €101 million). Besides, the net oil bill rose by €171 million. In the period under review, the services surplus increased, as the rise in net receipts from travel services offset the fall in net transport receipts. It should be recalled at this point that, as from May 2002, statistical data on travel receipts and payments are based on a sample survey ("border survey"); hence data may not be fully comparable with those of previous periods. The income account deficit increased mainly because of the rise in net payments for interest, dividends and profits. This development reflects lower interest rates and dividend yields in 2002, which resulted in a drop in receipts as well as a (relatively smaller) decrease in payments. Finally, the narrowing of the transfers surplus is almost equally attributable to the reduction in net EU transfers, the increase in general government payments and the decrease in the other sectors’ net receipts.

Financial account balance

In July 2002, direct and portfolio investment recorded net outflows of €159 million and €460 million respectively. In particular, residents’ direct investment abroad reached €150 million, €80 million of which concern the acquisition of the Spanish firm "Crown Cork" by Hellas Can S.A. As regards portfolio investment, the outflow of residents’ funds for the purchase of foreign bonds and the decrease in non-residents’ holdings of Greek bonds were only partly offset by inflows of non-residents’ funds for the purchase of shares. "Other investment" showed a considerable net inflow. Specifically, non-residents’ deposits in Greece were almost 50% higher than residents’ funds outflows, which mainly concerned repos and deposits abroad.

During the seven months from January to July 2002, direct investment recorded a net outflow of €333 million, exclusively attributable to residents’ investment abroad. During the period under review, portfolio investment recorded a substantial net inflow (of €6,056 million), connected with the large inflow of foreign investors’ funds mainly for the purchase of Greek government bonds and secondarily for the purchase of shares (€6,674 million and €1,156 million, respectively), which more than offset the outflow for the purchase of foreign bonds and shares by Greek investors (€1,551 million and €118 million, respectively). The shift of both foreign and Greek investors towards the bond market reflects the uncertainty prevailing in international capital markets.

As a result of the developments in the current account and the financial account balances, Greece’s reserve assets came to €8.6 billion euro at end-July 2002.

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