Current account balance
In June 2004, the current account deficit decreased slightly year-on-year. Underlying this improvement was mainly the widening of the services surplus and, secondarily, the narrowing of the income account deficit, whereas the trade deficit grew and the transfers surplus declined.
Specifically, the widening of the trade deficit is mainly accounted for by an increase in the non-oil trade deficit, while the net oil import bill showed a small rise. The services surplus improved considerably as a result of a rise in net transport (mainly shipping) receipts. The decline in the income account deficit stemmed from lower interest payments on Greek Government bonds. Finally, the narrowing of the transfers surplus in June reflects the fact that net EU transfers to general government were negative.
In the first half of 2004, the current account deficit narrowed considerably (by euro 1,047 million) over the same period in 2003 and reached euro 4,744 million. This development mainly reflects a substantial rise in the services surplus and, secondarily, an increase in the transfers surplus, which, together, more than offset the widening of the trade deficit, while the income account deficit remained virtually unchanged. Specifically, the trade deficit grew by euro 862 million relative to the same period in 2003. This reflects a euro 1,636 million (or 11.8%) increase in the non-oil import bill, which more than offset both a euro 655 million (or 13.9%) rise in non-oil export receipts and a euro 119 million decrease in the net oil import bill. Besides, the services surplus grew by euro 1,682 million owing to a big rise (of euro 1,464 million) in net transport (mainly shipping) receipts and, to a much lesser extent, an increase in net travel receipts and a drop in net payments for ??other services??. Finally, the euro 212 million growth of the transfers surplus during the first half of 2004 is accounted for by a euro 176 million increase in net EU transfers to general government, largely stemming from the February inflows.

Financial account balance
In June 2004, a small net outflow was observed under direct investment. Under portfolio investment, the net outflow of euro 104 million mainly reflects the fact that residents' purchases of bonds issued by non-residents exceeded non-residents' purchases of Greek bonds and shares. Finally, as regards "other investment", the net inflow of ?772 million reflects the fact that the increase in residents' (credit institutions?) deposits and repos abroad was lower than the rise in non-residents? deposits and repos in Greece, combined with the inflow of funds for the securitisation of housing loans amounting to euro 750 million and with the granting of loans to residents.
In January-June 2004, a net inflow of euro 346 million was observed under direct investment, which mainly reflects the acquisition of PANAFON S.A. by VODAFONE in January and the acquisition of the General Bank of Greece by Sociιtι Gιnιrale in March, as mentioned in earlier press releases. Over the same period, a substantial net inflow of euro 5,571 million was recorded under portfolio investment, mainly reflecting non-residents' purchases of Greek government bonds, which more than offset residents' outflows to foreign bonds. Finally, a net outflow of ?1,838 million under ??other investment?? is largely associated with residents' (mainly credit institutions') sizeable outflows to deposits and repos abroad and, to a lesser extent, outflows for the repayment of loans granted by non-residents, which more than offset non-residents' inflows to deposits and repos.
At end-June 2004, Greece's reserve assets came to euro 3.3 billion. It should be noted that, as early as in the first months of 2003, the Bank of Greece diversified its portfolio, reducing its non-euro area currency holdings, which are included in reserve assets, and 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 improved the return on its investments. (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 July 2004 will be released on 17 September 2004.

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