Greece’s current account deficit narrowed considerably (by 1,047 million euros) in the first half of 2004, year-on-year, to 4,744 million euros, the Bank of Greece said a statement yesterday The improvement mainly reflects a substantial rise in the services surplus, and, secondarily, an increase in the transfers surplus, which together more than offset the widening of the trade deficit. The income account deficit remained virtually unchanged. The trade deficit grew by 862 million euros, year-on-year, the result of a 1,636-million-euro, or 11.8 percent, increase in the non-oil import bill, which more than offset both a 655-million-euro, or 13.9 percent, rise in non-oil export receipts and a decrease of 119 million in the net oil import bill. The services surplus grew by 1,682 million euros owing to a big rise (1,464 million) in net transport (mainly shipping) receipts and, to a much lesser extent, an increase in net travel receipts, in spite of a climate of general gloom in the tourism industry. The 212-million-euro growth of the transfers surplus during the first half of 2004 is accounted for by a 176-million-euro increase in net EU transfers to the general government, largely stemming from the February inflows. There was a net inflow of 346 million euros in the direct investment account in the January-June period, mainly reflecting the acquisition of mobile operator Panafon by parent company Vodafone in January and the acquisition of General Bank by France’s Societe Generale in March. Over the same period, there was a substantial net inflow of 5,571 million euros in the portfolio investment account, mainly reflecting foreign purchases of Greek government bonds which more than offset residents’ outflows to foreign bonds. Finally, a net outflow of 1,838 million euros under «other investment» is mainly attributed to banks’ sizable outflows to deposits and repos abroad. At the end of June, Greece’s reserve assets came to 3.3 billion euros. In the first months of 2003, the Bank of Greece diversified its portfolio, reducing its non-euro area currency holdings, which are included in reserve assets, and 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 of a need to maintain high foreign currency reserves, by the above diversification the Bank of Greece improved the return on its investments, said the statement. In June 2004, the current account deficit decreased slightly year-on-year. The chief factor underlying this improvement was the widening of the services surplus and, secondarily, the narrowing of the income account deficit, whereas the trade deficit grew and the transfers surplus declined.