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Balance of payments OCTOBER 2003

17/12/2003 - Press Releases

Current account balance

In October 2003, the current account deficit narrowed considerably year-on-year. This mainly came as a result of a decrease in the trade deficit and, to a lesser extent, of an increase in the services surplus.

Specifically, the improvement of the trade balance is mainly due to an increase in non-oil export receipts, as well as a decrease in the net oil import bill. The small rise in the services surplus mainly stemmed from the growth of net transport (notably sea transport) receipts and secondarily from ''other services'' receipts, while net travel receipts declined. It should be stressed that the October travel receipts and payments data are comparable year-on-year and are derived from a border survey. With regard to the widening of the income account deficit, this is mainly accounted for by a rise in net interest, dividend and profit payments. Finally, the drop of the transfers surplus mainly reflects a decrease in net EU transfers to general government.

In January-October 2003, the non-oil trade deficit fell, while the services surplus grew. Despite these favourable developments, the rise in net oil imports, the widening of the income account deficit and the narrowing of the transfers surplus resulted in the current account deficit reaching €5,805 million, i.e. a €307 million increase year-on-year. As a result of a €395 million rise in non-oil export receipts in January-October 2003 and a decline of €184 million in the non-oil import bill, the non-oil trade deficit narrowed by €579 million. By contrast, over the same period, the net oil import bill increased by €454 million. Besides, the services surplus grew, as the rise in net transport receipts more than offset the decrease in net travel receipts. (It should be recalled that the travel balance statistics for the entire January-October 2003 period are not comparable with those in the corresponding period of 2002, as their compilation on the basis of the relevant border survey started in mid-May 2002.) The income account deficit widened by €571 million as a result of increased net interest payments on Greek government bonds, owing to a rise in non-residents' holdings of such securities since the beginning of 2003. Finally, underlying the €385 million reduction in the transfers surplus was a decline in net EU transfers to general government. This decrease more than offset the growth of net transfers to other sectors.

Financial account balance

In October 2003, non-residents' financial flows for direct investment in Greece were sizeable and were mainly accounted for by a €398 million inflow for the acquisition of the Papastratos tobacco company by Philip Morris. Under portfolio investment, a net outflow of €166 million mainly concerns a decrease in non-residents' holdings of Greek government bonds, which was largely offset by both residents' sales of foreign bonds and a rise in non-residents' holdings of Greek companies' equities (mainly reflecting acquisitions of National Bank of Greece and Piraeus Bank equity packages by foreign institutional investors). Finally, as regards "other investment", the net inflow of €484 million reflects an increase in non-residents' deposits and repo holdings in Greece. This inflow was largely offset by a rise in domestic credit institutions' and institutional investors' deposits and repo holdings abroad.

In January-October 2003, a net outflow of €273 million was observed under direct investment. Over the same period, a substantial net inflow of €11,154 million was recorded under portfolio investment. This development is mainly associated with an inflow of foreign investors' funds for the purchase of Greek bonds, which grew considerably in comparison with the same period in 2002. At the same time, residents' portfolio investment abroad grew considerably, mainly as a result of Bank of Greece's investment in bonds issued by euro area Member States. In the context of its portfolio restructuring, the Bank of Greece also reduced its holdings of non-euro area currencies, which led to a corresponding reduction in its reserve assets. Finally, under ''other investment'' a net outflow of €8,197 million was recorded, which reflects residents' (mainly credit institutions') sizeable outflows to deposits and repos abroad and substantial general government loan repayments.

At end-October 2003, Greece's reserve assets came to €5.0 billion. (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 assets of the ECB.)

Note: Balance of payments data for November 2003 will be released on 23 January 2004. .

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