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Balance of payments: OCTOBER 2002

17/12/2002 - Press Releases

Current account balance

In October 2002, the current account balance recorded a €1,036 million deficit, €272 million higher than in October 2001. This increase resulted mainly from the rise in the trade deficit and, to a lesser extent, from the fall in the transfers surplus. By contrast, the services surplus grew, while a small increase was recorded in the income account deficit.

The widening of the trade deficit is mainly due to an increase in the net fuel import bill. As regards the non-oil balance, payments for imports increased slightly and export receipts remained unchanged; thus, the non-oil trade deficit approximately remained at October 2001 levels. The rise in the services surplus resulted from the apparent growth of net travel receipts. It should be noted, however, that, as explained below, 2002 data on travel services are not fully comparable with those for previous years. The decrease in the transfers surplus reflects the fall in net receipts in October 2002 - mainly of the general government from the EU but also of the other economic sectors. Finally, the income account deficit increased only slightly.

During the January-October 2002 period, the current account deficit grew by €673 million, compared with that in the corresponding 2001 period, and came to €6,403 million. This development reflects mainly the narrowing of the transfers surplus but also the widening of the trade deficit, which was connected to a rise both in the non-oil trade deficit and in the net fuel import bill. A small increase was recorded 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 €400 million during the January-October 2002 period, as a result of the considerable reduction (by €549 million) of export receipts and despite the small decrease (by €149 million) in the import bill. At the same time, net oil imports rose by €319 million. Over the period under review, the services surplus increased, as the rise in net receipts from travel and other services more than offset the fall in net transport receipts. It should be recalled that, as from May 2002, travel receipts and payments are calculated on the basis of a sample survey ("border survey"); thus data are not fully comparable with those for previous periods. The income account deficit increased mainly because of the rise in net payments for interest, dividends and profits. This development reflects the fall of interest rates and the decrease in dividend yields in 2002, which resulted in a drop in receipts and a relatively smaller decrease in payments. Finally, the decrease in the transfers surplus is attributable to the reduction in EU transfers, the increase in general government payments and the decrease in the other sectors’ net receipts. It should be noted that, as from September 2002, general government receipts from and payments to the EU are recorded separately (and not on a "net" basis, as was the case in the past). Back data have been revised accordingly, so as to be comparable to new data.

Financial account balance

In October 2002, residents' direct investment abroad and non-residents' direct investment in Greece were low. No significant capital flows were recorded under portfolio investment. The net outflow of €226 million mainly reflects residents' investment abroad for the purchase of foreign bonds. As regards "other investment", a net inflow of €1,191 million was recorded, connected mainly to the increase in deposits and repo holdings by non-residents and also to the reduction of residents' deposits abroad.

During the January-October 2002 period, direct investment recorded net outflows of €474 million, mainly attributable to residents’ investment abroad. During the period under review, portfolio investment recorded a substantial net inflow (of €9,510 million), connected with the large inflow of foreign investors’ funds, mainly for the purchase of Greek government bonds and, to a lesser extent, for the purchase of shares. The outflow of funds for the purchase of foreign bonds by Greek investors is also considerable. The continuing shift of both foreign and Greek investors to the bond market reflects of the cautiousness with which investors continue to view developments in the international capital markets. Finally, "other investment" recorded a small net outflow of 114 million euro. This development is connected to a significant increase in claims, which, however, was largely offset by a corresponding increase in liabilities. The considerable rise in deposits and repo holdings by non-residents and residents, respectively, is the main reason of both increases. It should also be noted, as far as liabilities are concerned, that repayment of general government loans was quite substantial.

At end-October 2002, Greece’s reserve assets came to €9 billion euro. (It should be recalled that, since Greece joined the euro area in January 2001, reserve assets, as defined by the European Central Bank, only include monetary gold, the "reserve position" at the IMF, "Special Drawing Rights", and Bank of Greece's 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 November will be released on 20 January 2003.

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