Current account balance
In February 2004, the current account balance improved considerably and showed a small surplus, in comparison with a deficit in February 2003. Specifically, the transfers surplus and the services surplus approximately doubled. At the same time, the income account deficit narrowed. By contrast, the trade deficit rose over the same period.
The growth of the trade deficit is mainly accounted for by an increase in the non-oil import bill, which more than offset the rise in non-oil export receipts. Moreover, the net oil import bill grew slightly. The increase in the services surplus stemmed from higher net transport receipts, while net travel receipts remained virtually unchanged. Finally, the rise in the transfers surplus reflects an increase in net EU transfers to general government to euro 1,436 million, from euro 614 million in February 2003.
In January-February 2004, the current account deficit narrowed considerably (by euro 1,082 million) over the same period in 2003 and reached euro 1,196 million. Specifically, the trade deficit fell slightly relative to the same period in 2003. This reflects a euro 189 million decrease in the net oil import bill, which was partly offset by a euro 136 million increase in the non-oil trade deficit. Besides, the services surplus grew considerably (by euro 415 million) due to a marked rise in net transport receipts, while net travel receipts dropped. The income account deficit fell by euro 159 million as a result of a decrease in net interest, dividend and profit payments. Finally, the transfers surplus grew by euro 455 million, because of an increase in net EU transfers to general government.
Financial account balance
In February 2004, there were no significant direct investment flows. Under portfolio investment, a net inflow of euro 3,112 million mainly reflects purchases of Greek government bonds by non-residents. Finally, as regards "other investment", a net outflow of euro 3,443 million was mainly associated with a rise in resident credit institutions? and institutional investors' deposits and repo holdings abroad, as well as a drop in non-residents' deposits and repo holdings in Greece.
In January-February 2004, a net inflow of euro 356 million was observed under direct investment. Over the same period, a substantial net inflow of euro 2,552 million was recorded under portfolio investment. This mainly reflects the fact that the inflow of funds as a result of increased non-residents' holdings of Greek government paper far outweighed the outflow of funds accounted for by the rise in residents' investments in securities issued by non-residents. Finally, under "other investment" a net outflow of euro 2,827 million was recorded, which is mainly connected with residents' (mainly credit institutions') continued sizeable outflows to deposits and repos abroad.
At end-February 2004, Greece's reserve assets came to euro 3.7 billion. It should be noted that since the first months of 2003 the Bank of Greece has been diversifying its portfolio, by reducing its non-euro area currency (mainly US dollar) 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 now less need to maintain high foreign currency reserves, by the above diversification the Bank of Greece has been improving the return on its investments. (It should be recalled that, since Greece joined the euro area in January 2001, reserve assets, as defined by the European Central Bank, include only monetary gold, the "reserve position" with the IMF, "Special Drawing Rights", and Bank of Greece claims in foreign currency on residents of non-euro area countries. Conversely, reserve assets do not include claims in euro on residents of non-euro area countries, claims in foreign currency and in euro on residents of euro area countries, and the Bank of Greece participation in the capital and the reserve assets of the ECB.)
Note: Balance of payments data for March 2004 will be released on 21 May 2004.
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