Greek C/A deficit narrows

Greece’s current account deficit in June narrowed by some 145 million euros year-on-year and totaled 729 million, compared with 874 million in June 2004, the Bank of Greece said yesterday. The development is mainly due to a considerable rise in the services surplus and, secondarily, to the combined effect of a decrease in the trade deficit and a bigger transfers surplus, which more than offset the widening of the income account deficit. Specifically, the overall trade deficit narrowed by 111 million euros year-on-year as the trade deficit excluding oil and ships contracted by an appreciable 284 million, whereas the net oil import bill rose by 80 million and net payments of 34 million were recorded in the ships’ balance. The services surplus widened by 157 million euros year-on-year, owing to a rise in net transport and travel receipts. The transfers surplus also rose by 82 million euros year-on-year, exclusively because of a 122-million-euro rise in net EU transfers to the general government fund. More specifically, gross EU transfers to general government grew by 287 million, more than offsetting the 165 million increase in general government gross payments to the EU. By contrast, in June 2005 the income account deficit widened by 205 million euros year-on-year. In the first half of 2005, the current account deficit rose by 1,501 million over the corresponding period for 2004 and amounted to 6,735 million, mainly because net payments were recorded this year in the ships’ balance (as opposed to net receipts recorded for the corresponding period of 2004), due also to the rise in the net oil import bill and the increase in general government gross payments to the EU and in net interest, dividend and profit payments. By contrast, the trade deficit excluding oil and ships decreased. Moreover, gross EU transfers to general government grew appreciably and the services surplus rose. The services surplus widened considerably (by 328 million euros). Shipping receipts Underlying this improvement was a further increase in net transport (mainly shipping) receipts; despite the continuing fall in freight rates in international markets, net shipping receipts were higher by 383 million, compared with the already very high receipts recorded in the first half of 2004. Gross travel receipts (travel spending in Greece by non-residents) rose by 189 million or 6.1 percent, while gross travel payments (travel spending abroad by Greek residents) grew by 127 million euros, or 12.3 percent, thereby pushing up net travel receipts by just 61 million euros. By contrast, a rise was recorded in net payments for «other» services. The data show that Greek capital continues to seek investment and business opportunities abroad, while foreign investors in Greece seem to prefer the stock market. In the first half of the year, the two reverse flows equaled about 5 billion euros each. According to the central bank, in June a net outflow of 1,987 million euros was mainly the result of 3,217 million worth of purchases of foreign bonds and T-bills by Greek residents. In the «other» investment category, a significant inflow was noted due to a fall in the placements by domestic credit institutions in deposits and repos abroad. Greek foreign direct investment abroad was subdued, reaching 32 million euros, which included 13 million from EFG Eurobank Ergasias for the acquisition of a greater share in Romania’s Bankpost, and 20 million euros from Piraeus Bank for the acquisition of a 69.3 percent stake in Egyptian Commercial Bank. Conversely, 93 million euros flowed in, in the form of loans by foreign parent companies to Greek subsidiaries.