2003 C/A deficit edges up, trade balance lower

Greece’s current account deficit in 2003 rose by 76 million euros to 8,648 million, which represents 5.7 percent of gross domestic product (against 6.1 percent in 2002), the Bank of Greece said yesterday. Both the total trade deficit and the non-oil trade deficit ended lower. In particular, as a result of a 521-million-euro increase in non-oil export receipts and a 75-million-euro decline in the non-oil import bill, the non-oil trade deficit decreased by 596 million. However, the fall in the total trade deficit was visibly smaller, as the net oil import bill grew by 531 million euros. The services balance improved, as its surplus widened by 743 million euros, reflecting an improvement in net transport receipts, while net travel receipts decreased. The income account deficit grew by 524 million euros as a result of increased interest payments on Greek government bonds, owing to the continued rise in non-residents’ holdings of such securities. Finally, underlying the 360-million-euro reduction in the transfers surplus was a decline in net European Union transfers to the general government, which more than offset the growth of net transfers to other sectors. Financial account balance There was a substantial net inflow of 1,144 million euros for direct investment in December. This development was mainly due to an inflow of funds for the acquisition of the free float of mobile telephony operator Panafon by UK’s Vodafone, and largely accounted for a net inflow of 545 million euros in direct investment in 2003 as a whole. There was a substantial net inflow of 12,334 million euros for portfolio investment, mainly for the purchase of Greek government bonds. Residents’ portfolio investment abroad grew notably, reflecting the central bank’s increased investment in bonds issued by eurozone member states and reduced holdings of non-euro area currencies. Finally, under «other investment,» there was a net outflow of 7,624 million euros, mainly representing credit institutions’ placements of deposits and repos abroad, and substantial loan repayments. At the end of 2003, Greece’s reserve assets came to 4.6 billion euros. The Bank of Greece reduced its holdings of non-eurozone currencies (mainly US dollars) and increased its asset items that either offer higher yields or are denominated in euros, reflecting a lesser need to maintain a high level of reserve assets.