The current account deficit narrowed considerably over the first five months of the year, notably thanks to the contribution of receipts from transportation services, mainly from the shipping sector. The current account deficit for January-May 2004 stood at about 4.04 billion euros, down from 5.07 billion during the same period in 2003 and 4.46 billion in 2002. «This development mainly reflects a substantial rise in the services surplus and, to a lesser extent, an appreciable increase in the transfers surplus, which, together, more than offset the widening of the trade deficit and the income account deficit,» the Bank of Greece, which released the figures, said in a statement yesterday. The services surplus increased to just over 4 billion euros in the first five months of 2004, from 2.62 billion in 2003 and 2.29 billion in 2002. «The (improvement was) a result of a rise in net transport – mainly shipping – receipts and, secondarily, an increase in net travel receipts,» the Bank of Greece said. The transfers surplus widened to 3.14 billion euros, from 2.77 billion in the first half of 2003, mainly thanks to a significant increase in net transfers from the European Union. This transfer of funds, mostly for infrastructure projects funded by the Third Community Support Framework (CSFIII) took place mainly in February, but came too late to benefit the previous Socialist government, long criticized for the low absorption rate of EU funds, which was defeated at the March 7 polls. The trade deficit in the first five months of the year stood at 10.08 billion euros, up from 9.42 billion during the same period in 2003 and 9.37 billion in 2002. The growth «reflects a 1.30-billion-euro, or 11.4 percent, increase in the non-oil import bill, which more than offset both a 477-million-euro (12.2 percent) rise in non-oil export receipts and a 160-million-euro decrease in the net oil import bill,» the Bank of Greece said. For the month of May alone, the current account deficit narrowed to 681 million euros, compared to 738 million in May 2003 and 741.3 million in May 2002. Again, this was due to the widening of the services surplus outweighing the bigger trade and income account deficits. During this month, the transfers surplus narrowed because transfers from the EU declined. Financial account balance In May 2004, a small net outflow was observed under direct investment. Under portfolio investment, a net outflow of 3.042 billion euros mainly reflects residents’ increased purchases of bonds – whether Treasury or corporate – issued in other countries. Finally, regarding «other investment,» a net inflow of 4.02 billion euros largely reflects a decrease in residents’ (credit institutions’) deposits and repos abroad, as well as an increase in non-residents’ deposits and repos in Greece. In January-May 2004, a net inflow of 439 million euros was observed under direct investment, which mainly reflects the acquisition of mobile telecommunications firm Panafon by parent company Vodafone in January and the acquisition of a controlling stake in the General Bank of Greece by Societe Generale in March. Over the same period, a substantial net inflow of 5.68 billion euros was recorded under portfolio investment, mainly reflecting non-residents’ purchases of Greek government bonds, which more than offset the corresponding outflows by residents to foreign bonds. Finally, a net outflow of 2.61 billion euros under «other investment» is largely associated with residents’ (mainly credit institutions’) sizable outflows to deposits and repos abroad and, to a lesser extent, outflows for the repayment of loans granted by non-residents. At end-May 2004, Greece’s reserve assets were 3.4 billion euros. Balance of payments data for June 2004 will be released on August 18.