Current account balance

In August 2003, the current account showed a surplus, which was almost double that of August 2002. This reflects almost equally a decrease in the trade deficit, an increase in the services surplus and a rise in the transfers surplus; it also reflects, but to a lesser extent, a decline in the income account deficit.

As regards the trade balance, the drop in the non-oil import bill was larger than the decline in non-oil export receipts and, as a result, the non-oil trade deficit narrowed. At the same time, the net oil import bill fell.

The rise in the services surplus mainly stemmed from an increase in net transport (notably sea transport) receipts. Net travel receipts fell only slightly, as the decline in gross payments (i.e. residents' expenditure abroad) almost offset the decrease in gross receipts (i.e. non-residents' expenditure in Greece). It should be stressed that the August 2003 and August 2002 travel balance data are derived from a border survey and therefore are comparable. According to these data, the 3% decline in receipts in August 2003 over the same month in 2002 was appreciably lower than the decrease recorded in June and July 2003.

The income account deficit narrowed, mainly as a result of a decline in interest payments on Greek government bonds, while the growth of the transfers surplus mostly reflects the fact that net EU transfers to general government more than doubled.

In January-August 2003, the current account deficit was smaller than in the January-July 2003 period, because of the favourable August out-turn. In comparison with the first eight months of 2002, the non-oil trade deficit fell, while the services surplus grew. These positive developments were offset by a widening of the income account deficit and the oil trade deficit and a narrowing of the transfers surplus. As a result, the current account deficit rose by Euro 390 million over the same period in 2002.

The non-oil trade deficit decreased by Euro 436 million in January-August 2003, as export receipts grew by Euro 218 million and the import bill declined by Euro 217 million. At the same time, however, the net oil import bill rose by Euro 466 million. Over the same period, the services surplus grew by Euro 506 million, as the increase 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-August 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 Euro 510 million, mainly owing to increased net interest payments on Greek government bonds, which are associated with a commensurate rise in non-residents' holdings of such securities since the beginning of 2003. Finally, underlying the narrowing (by Euro 357 million) of the transfers surplus was a reduction in transfers from the EU to general government, which more than offset the growth of net transfers to the other sectors. It should be noted that the decrease in net transfers from the EU to general government was observed in the first months of 2003, while an increase has been recorded since June.

Financial account balance

In August 2003, financial flows under direct investment were low, the same as in August 2002. Under portfolio investment, a net inflow of Euro 792 million was observed, mainly reflecting an inflow of funds for the purchase of Greek government bonds by non-residents, which was partly offset by an outflow for acquisition of foreign bonds by residents. Finally, as regards "other investment", the net outflow of Euro 1,189 million was mainly connected with a decrease in liabilities stemming from the operation of the TARGET payments system and with a decline in non-residents? deposits and repo holdings in Greece. These outflows were partly offset by a substantial inflow associated with a decline in domestic credit institutions? and institutional investors? deposits and repo holdings abroad.

In January-August 2003, a large net inflow of Euro 11,312 million was recorded under portfolio investment. This development is mainly associated with an inflow of foreign investors' funds for the purchase of Greek government bonds, which increased considerably year-on-year. At the same time, residents' portfolio investment abroad grew appreciably, mainly owing to the purchase by the Bank of Greece of euro-denominated bonds issued by euro area Member States. At the same time, in the context of the restructuring of its portfolio, the Bank of Greece also reduced its holdings of non-euro area currencies and monetary gold, which led to a corresponding reduction in its reserve assets. During the same period, a net outflow of Euro 638 million was observed under direct investment. Finally, under "other investment", a net outflow of Euro 9,211 million was recorded. This is connected with a decrease in deposits and repo holdings by non-residents, a considerable outflow of funds for residents' (mainly credit institutions') deposits and repo holdings abroad, and substantial loan repayments mainly by general government.

At end-August 2003, Greece's reserve assets stood at Euro 5.1 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 September 2003 will be released on 17 November 2003.

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