Greece's current account surplus grew considerably in July 2004 over the same month in 2002 and 2003, the Bank of Greece reported on Friday.

It attributed the substantial year-on-year increase to a rise in the services surplus, mainly through the growth of net transport receipts from shipping, and a decline in net payments for ‘‘other’’ services. By contrast, net travel receipts fell. Also a factor was the growth of the transfers surplus in July that reflected an increase in net EU transfers to general government and lastly, to a lesser extent, a narrowing of the income account deficit owing to a drop in net interest, dividend and profit payments.
By contrast, the central bank reported a widening of the trade deficit due to an increase in the non-oil trade deficit and a rise in the net oil import bill. According to other sources, this has increased by 8.5 per cent and now exceeds 14.3 billion euros. During this time, exports increased by 13.14 percent and imports by 11.78 per cent.

The Bank of Greece has also noted a considerable decrease in the current account deficit from January to July 2004 over the same period of 2003, which fell by €1,295 million to reach €4.480 billion. It said this development mainly reflected a rise in the services surplus and an increase in the transfer surplus, as well as a small decline in the income account deficit, all of which together more than offset a considerable widening of the trade deficit (which grew by €1,124 million relative to the same period of 2003).

Specifically, a €1,916 million (or 11.7%) increase in the non-oil import bill more than offset both a €739 million (or 13.2%) rise in non-oil export receipts and a small decrease (of €53 million) in the net oil import bill. The services surplus grew by €1,859 million owing to a big rise (of €1,681 million) in net transport receipts (mainly from shipping) and, to a much lesser extent, a drop in net payments for ‘‘other services’’, while net travel receipts remained virtually unchanged. Finally, the €516 million growth of the transfers surplus is accounted for by a €486 million increase in net EU transfers to general government, largely stemming from high inflows in February and July.

According to a financial report by Alpha Bank, the widening trade deficit reflects the low competitiveness of domestic products, also seen in falling production in traditional labor-intensive sectors that are unable to increase production in spite of increasing domestic demand due to the falling competitiveness of their products.
The Bank of Greece also reported a positive net picture for the financial account balance in July, despite a slow rate of net inflows.

In January-July 2004, non-residents’ direct investment in Greece reached €748 million, while residents’ direct investment abroad came to €312 million, resulting in a net inflow of €435 million under direct investment. Over the same period, a substantial net inflow of €6,846 million was recorded under portfolio investment, mainly reflecting non-residents’ purchases of Greek government bonds (€12,132 million), which more than offset residents’ purchases of foreign bonds (€6,560 million). Finally, a net outflow of €3,068 million under ‘‘other investment’’ is largely associated with domestic credit institutions’ sizeable outflows (of €7,495 million) to deposits and repos abroad and, to a lesser extent, outflows (of €854 million) for the repayment of loans granted by non-residents, which more than offset non-residents’ inflows to deposits and repos (€5,319 million).

At end-July 2004, Greece’s reserve assets came to €3.5 billion, the central bank said.

Source: Athens News Agency

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