Current account balance

In August 2004, the current account showed a surplus considerably bigger than the one in August 2003. This improvement is mainly due to a large increase in the services surplus and - to a much lesser extent - to a rise in the transfers surplus. By contrast, both the trade and the income account deficits grew.

Specifically, underlying the widening of the trade deficit were on the one hand an increase in the non-oil trade deficit and, on the other, a rise in the net oil import bill, which almost tripled, reflecting substantially higher oil prices in the world market. The services surplus improved considerably, mainly as a result of two factors: First, the substantial growth of net travel receipts, which were affected favourably by the holding of the Olympic Games, and second, the rise in net transport receipts (mainly from shipping). It should be noted that gross travel receipts rose by 25.4% year-on-year in August 2004. Finally, net receipts from ??other?? services also increased, mainly as a result of a rise in receipts from services associated with the holding of the Olympic Games (notably television broadcasting fees). The income account deficit grew owing to a rise in net interest, dividend and profit payments. Finally, the growth of the transfers surplus reflects an increase in net EU transfers to general government.

In January-August 2004, the current account deficit narrowed considerably (by euro 1,583 million) over the same period of 2003, falling to euro 3,146 million. This development mainly reflects a substantial rise in the services surplus and, secondarily, an increase in the transfers surplus, which, taken together, more than offset the strong rise in the trade deficit. The trade deficit grew by euro 1,820 million relative to the same period of 2003. Specifically, a euro 2,354 million (or 12.9%) increase in the non-oil import bill more than offset a euro 879 million (or 13.9%) rise in non-oil export receipts, whereas the net oil import bill increased by euro 345 million. Besides, the services surplus grew by euro 2,797 million, mainly owing to a big rise (of euro 1,974 million) in net transport receipts (mainly from shipping) and, to a lesser extent, a euro 588 million increase in net travel receipts and a euro 235 drop in net payments for "other services". Finally, the euro 631 million year-on-year growth of the transfers surplus is almost exclusively accounted for by a euro 823 million increase in general government receipts (mainly transfers from the EU), which far exceeded the euro 185 million rise in general government payments (mainly to the EU).

Financial account balance

In August 2004, a net inflow of ?165 million was recorded under direct investment. The most important direct investment in Greece by non-residents was the increase in Paneuropean Oil and Industrial Holdings S.A.'s participation in the capital of Hellenic Petroleum S.A. Under portfolio investment, a net inflow of euro 3,915 million mainly reflects non-residents' purchases of Greek government securities (euro 3,470 million). Finally, as regards "other investment", a net outflow of euro 5,341 million resulted from an increase in residents' claims on non-residents (mainly an increase in domestic credit institutions' and institutional investors' deposits and repos abroad), as well as a decrease in residents' liabilities vis-ΰ-vis non-residents (mainly a decline in non-residents' deposits and repo holdings in Greece).

In January-August 2004, non-residents' direct investment in Greece reached euro 925 million, while residents' direct investment abroad came to euro 324 million, resulting in a net inflow of euro 600 million under direct investment. Over the same period, a substantial net inflow of euro 10,761 million was recorded under portfolio investment, mainly reflecting non-residents' inflows for the purchase of Greek government bonds (euro 15,593 million), which more than offset residents? outflows for the purchase of foreign bonds (euro 6,212 million). Finally, a net outflow of euro 8,408 million under ??other investment?? is largely associated with domestic credit institutions? sizeable outflows (of euro 10,575 million) to deposits and repos abroad and ? to a lesser extent ? outflows (of euro 1,193 million) for the repayment of loans granted to residents by non-residents, which more than offset non-residents' inflows to deposits and repos (euro 3,404 million).

At end-August 2004, Greece's reserve assets came to euro 3.3 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 by increasing its higher-yield or euro-denominated assets ? mainly bonds issued by euro area Member States, which are not included in reserve assets. Given that there is less need to maintain high foreign currency reserves, by the above diversification the Bank of Greece has improved the return on its investments. 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 September 2004 will be released on 19 November 2004.