Current account deficit stays put

The current account deficit remained virtually the same year-on-year – at 1.3 billion euros – in January, the Bank of Greece announced yesterday. The drop in the trade deficit and the rise in the services surplus were fully offset by the decrease in the transfers surplus, while the income account deficit was almost unchanged. Specifically, the trade deficit narrowed by 173 million euros in comparison with January 2003 due to a considerable fall in the net oil import bill. By contrast, the non-oil trade deficit grew slightly, because the increase in export receipts was more than offset by the rise in import payments. The increase in the services surplus stemmed from the growth of net transport receipts, while net travel receipts remained virtually unchanged. Finally, the narrowing of the transfers surplus reflects almost exclusively a drop in net EU transfers to general government, to 383.9 million euros, from 669 million, in January 2003. This underscores the problems in absorbing funds earmarked for Greece through the Third Community Support Framework (CSFIII) program as well as delays in aid to farmers. In January 2004, a substantial inflow of non-residents’ funds – 426 million euros – was observed under direct investment, associated with the ongoing procedure of the acquisition of mobile telecommunications company Panafon by parent company Vodafone. Under portfolio investment, a net outflow of 560 million euros was recorded. This mainly reflects the fact that outflows of funds due to increased residents’ investment in securities issued by non-residents outweighed inflows of funds associated with increased non-residents’ investment in Greek government bonds and Treasury bills. Finally, under «other investment,» a net inflow of 616 million euros was mainly due to the substantial inflow of non-residents’ funds for deposits and repos, which more than offset the rise in local banks’ and institutional investors’ deposits and repo holdings abroad.

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