Below are Greece's current account statistics for the period January-May 2016, compared with the same period of the previous year (source: Bank of Greece).
(in BEUR)
While the bottom line is encouraging (a 1 BEUR improvement over the previous year), there have been substantial developments in the services balance which the Bank of Greece comments as follows:
"The surplus of the services balance shrank by €1.3 billion in the January-May 2016 period, as net transport receipts registered a significant decline, which is also largely attributable to capital controls. Net travel receipts also recorded a fall. It should be noted that in the first five months of 2016 total non-residents' arrivals decreased by 1.3% and the corresponding receipts by 6.2%. These developments were offset to a small extent by an improvement in the other services balance".
I am not quite sure why the deterioration in the services balance is the result of capital controls because capital controls should affect payments to abroad and not from abroad. Service revenues from abroad declined by a staggering 3,1 BEUR to 6,2 BEUR.
(in BEUR)
| January-May | |||
| 2016 | 2015 | ||
| Revenue from abroad | |||
| Exports | 9,6 | 10,5 | |
| Services (e. g. tourism) | 6,2 | 9,3 | |
| Other income | 2,9 | 3,2 | |
| Current transfers | 0,9 | 1,1 | |
| ------ | ------ | ||
| Total revenue from abroad | 19,6 | 24,1 | |
| Expenses abroad | |||
| Imports | 16,4 | 18,6 | |
| Services (e. g. tourism) | 3,8 | 5,6 | |
| Other expense (e. g. interest) | 1,9 | 2,9 | |
| Current transfers | 0,9 | 1,4 | |
| ------ | ------ | ||
| Total expenses abroad | 23,0 | 28,5 | |
| Net foreign deficit (current account) | -3,4 | -4,4 | |
| Trade balance | -6,8 | -8,1 | |
| Services balance | 2,4 | 3,7 | |
| Other balance | 1,0 | 0,3 | |
| Current transfer balance | 0,0 | -0,3 | |
| ---- | ---- | ||
| Net foreign deficit (current account) | -3,4 | -4,4 | |
While the bottom line is encouraging (a 1 BEUR improvement over the previous year), there have been substantial developments in the services balance which the Bank of Greece comments as follows:
"The surplus of the services balance shrank by €1.3 billion in the January-May 2016 period, as net transport receipts registered a significant decline, which is also largely attributable to capital controls. Net travel receipts also recorded a fall. It should be noted that in the first five months of 2016 total non-residents' arrivals decreased by 1.3% and the corresponding receipts by 6.2%. These developments were offset to a small extent by an improvement in the other services balance".
I am not quite sure why the deterioration in the services balance is the result of capital controls because capital controls should affect payments to abroad and not from abroad. Service revenues from abroad declined by a staggering 3,1 BEUR to 6,2 BEUR.
I gather you haven't heard of the tourism collapse in the eastern Aegean islands due to the fact that tourists don't like the idea of seeing refugees around them.
ReplyDeleteAll of these are very positive signs: declined imports, aggressive cost cutting.
ReplyDeleteAs for the declined tourist receipts it's all Balkan related: reduced car entries for Albania, FYROM and Bulgaria/Romania. Another positive sign because this is not profit making tourism i.e. catering to lower Balkan profile tourists.
If you think that a small decline in imports alongside a massive decline in exports is positive, then you know nothing about economics. These are the signs of an economy in deteriorating condition -- not of one becoming more productive or competitive. This is also the foolish mistake of Schaeuble -- who thinks he knows a lot about economics.
DeleteI beg to differ. For starters the Jan-May window is kind of dead time zone for the Greek economy. Almost nothing happens during the first 5 months on any given year. Therefore to try to draw conclusions from a dead zone experience sounds like partisan politics to me. Wait until October and then we could talk. By November-December the Greek economy gets into a dead zone again. Nothing happens except higher energy costs to weather the winter.
DeleteBut look first where the decline in exports comes from. It's not from the EU8. It's mainly Asia, North Africa and Middle East.
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@Anonymous July 24, 2016 at 9:57 PM
DeleteYour comment does not make sense. The comparison is between two "dead zones" as you put it. The deterioration is serious (and don't forget that the first 5 months of 2015 were with the negotiating mess with the Eurogroup). The massive decline in exports from one year to the next has to be explained -- not swept under the carpet as something unimportant. This is the sort of mistake that Greek economists and politicians have been making for decades. Be aware of what is happening, and stop uttering trite comments that fail to analyze reality.
Capital controls affect all external transactions -- not only payments to abroad. Exports and imports are explicitly connected, and once you sever the free movement of money you damage both.
ReplyDeleteHowever, these are generalisations. Specific issues, such as reduced tourism in the Aegean islands because of the refugee crisis, may better explain the year-on changes. Also, these changes are minimal in the nett current a/c suggesting that Greece is managing its economic situation quite competently. However, the overall trend is bad -- indicating declining economic activity, even if the budget is well managed. This is largely the outcome of a sustained foolish macro policy imposed on the eurozone by Germany.
No, I believe your interpretation is wrong. There is no Greek tourism during the first 5 months of the year. Greek tourism is very seasonal and does not start until June ending in October of each year. You are jumping into conclusions in a manner that shows you are already biased.
DeleteGreek tourism does not start in June and end in October. Your conservatism is showing: try finding out about contemporary reality.
DeleteMoreover, my general comment does not apply to tourism. If my general comment is the more relevant, then the situation is very bad indeed. In other words, if the deterioration is not connected to tourism, then Greeks need to worry a lot more.
It is always good to remember Warren Buffet's common sensical explanation of how the current account works:
ReplyDeletehttp://klauskastner.blogspot.co.at/2011/11/warren-buffetts-simple-wisdoms.html
Perhaps dwelling into the actual numbers rather than politically speculating would serve us all a bit better. Analyze the numbers, see the weaknesses and identify the source of such weaknesses:
Deletehttp://www.pse.gr/node/3327
A careful analysis of actual trade figures might lead to different conclusions. In my opinion there are two major trends worth keeping in mind. The first trend is that roughly 40% of Greek exports are energy related and more specifically fuel and petroleum based products. This market for some reason has collapsed partly due to Turkey which used to be the major buyer of fuel products from Greek energy suppliers but now Turkey has its own brand new processing plants for converting crude into gasoline and petroleum products. The other part of the fuel market story is that Greece used to supply fuels for ships in transit and this part is now next to zero. See table below under Greek exports by country at the bottom of the table where it shows fueling EU ships and non_EU ships. (almost a -90% change). This could also be some sort of good news for Greece since these re-fueling(s) in the middle of the sea deprived the Greek state from substantial tax income which went unaccounted for and thus unreported. When you look in the trade by countries the following trends emerge: Italy is the best export market for Greece. Major markets such as Turkey, Egypt, MidEast (except Israel), South Korea are down by a great deal. Instead exports to China and Mexico are up. So there is a re-balancing of destinations for Greek trade under way:
ReplyDeletehttp://www.pse.gr/node/3327
As expect the primary surplus for the first 6 months is 2.4 Billion, much higher than the 1.8 Bil. balance for the same period last year. June heralds much better performance for Greece:
ReplyDeletehttp://news247.gr/eidiseis/oikonomia/prwtogenes-pleonasma-2-467dis-to-prwto-eksamhno-toy-2016.4188801.html
Achieving a primary surplus by destroying your economy is the aim of fools and narrow-minded accountants. This nonsense that Schaeuble has been imposing on the eurozone is the death knell of the European Union. You cannot destroy countries' economies for no good reason and expect people to tolerate it -- and the Greeks have been fairly docile in recent years. A military coup was of course averted by Malakas Papandreou, so that he could plunge Greece into further crisis.
DeleteGreece can very easily achieve primary surpluses without even trying. All it has to do is formally separate church and state and then tax or confiscate for sale all church properties which constitute the great majority of the Greek real estate market. One of the main reasons Greece does not have a formal inventory of all properties in Greece is the obstructionism by the church. BTW, the church is a totally unproductive part of the Greek GDP; it provides nothing and creates nothing other than freeloading on the public purse. To have priests getting paid by the state as public servants is an outrage and totally absurd.
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