Current account balance

In March 2004, the current account deficit remained virtually unchanged year-on-year. This reflects the fact that the big increase in the services surplus and the relatively small rise in the transfers surplus offset the growth of the trade deficit and of the income account deficit.

Specifically, the widening of the trade deficit is accounted for by an increase in the non-oil import bill, which more than offset the rise in non-oil export receipts. The net oil import bill showed a small decrease. The services surplus more than doubled as a result of a big rise in net transport (shipping) receipts. The growth of the income account deficit stemmed from higher net interest, dividend and profit payments. Finally, the widening of the transfers surplus mainly reflects an increase in net EU transfers to general government.

In the first quarter of 2004, the current account deficit narrowed considerably (by euro 1,090 million) with respect to the corresponding period in 2003 and reached euro 2,178 million. This development reflects a big rise in both the services surplus and the transfers surplus, as well as a decrease in the income account deficit, which more than offset the widening of the trade deficit.

Specifically, the trade deficit grew by euro 323 million relative to the same period in 2003. This reflects a euro 824 million (or 12.3%) increase in the non-oil import bill, which more than offset both a euro 283 million (or 12.2%) rise in non-oil export receipts and a euro 218 million decrease in the net oil import bill. Besides, the services surplus grew by euro 808 million owing to a big rise (of euro 723 million, or 69.6%) in net transport (mainly shipping) receipts, as well as a drop in net payments for ??other services??. Travel receipts (i.e. payments by non-residents for travel services in Greece) increased by euro 67 million, but travel payments (i.e. payments by residents of Greece for travel services abroad) grew more (by euro 84 million); as a result, net travel receipts fell by euro 17 million. The income account deficit decreased slightly (by euro 55 million) owing to a drop in net interest, dividend and profit payments. Finally, the euro 549 million growth of the transfers surplus is mainly accounted for by a ?570 million (or 34.3%) increase in net EU transfers to general government.

Financial account balance

In March 2004, under direct investment there was a net inflow of euro 168 million, which largely concerns the acquisition of the General Bank by Sociιtι Gιnιrale. Under portfolio investment, a net inflow of euro 1,287 million mainly reflects purchases of Greek government bonds and shares of Greek firms by non-residents. Finally, as regards "other investment", a net outflow of euro 233 million was mainly associated with government loan repayments.

In the first quarter of 2004, a net inflow of euro 525 million was recorded under direct investment. In the same period, a substantial net inflow of euro 3,839 million was recorded under portfolio investment. This mainly reflects the fact that the inflow of non-residents? funds for the purchase of Greek government bonds and shares of Greek firms exceeded the outflow of residents' funds for the purchase of bonds and shares abroad. Finally, a net outflow of euro 3,060 million under ??other investment?? is mainly connected with residents' (mainly credit institutions') sizeable outflows to deposits and repos abroad in the first two months of 2004.

At end-March 2004, Greece's reserve assets came to euro 3.7 billion. It should be noted 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 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 April 2004 will be released on 21 June 2004.