A Decade In The Life Of A Current Account

It was the year 2008 which will reserve Greece a spot of distinction in the world's history of absolutely shocking current accounts. In 2008, the Greek economy spent 105 BEUR outside its borders compared with only 69 BEUR which it earned outside its borders. In consequence, the external deficit of the Greek economy was 36 BEUR in that year. These numbers assume their real significance when comparing them to the 2008 GDP of 241 BEUR, as reported by ELSTAT: the external deficit was 15% of GDP (!). Perhaps not a world record but probably close to it.

Now, a decade later, Greece can reserve another spot of distinction, this time in the history of dramatic current account improvements. For 2017, the Bank of Greece reported an external deficit of 1,5 BEUR, or just about 1% of GDP. The significant figures of this development, as published by the Bank of Greece, are summarized below:

		Current Account (in BEUR)
		2017	2016		2008
Revenue from abroad
	Exports	27,9	24,5		21,9
	Services (e. g. tourism)	28,3	25,0		34,2
	Other income	6,1	5,9		9,0
	Current transfers	1,9	1,8		3,4
		------	------		------
	Total revenue from abroad	64,2	57,2		68,5
Expenses abroad
	Imports	46,3	41,1		66,3
	Services (e. g. tourism)	10,9	9,7		18,5
	Other expense (e. g. interest)	6,0	5,9		16,6
	Current transfers	2,5	2,4		3,7
		------	------		------
	Total expenses abroad	65,7	59,1		105,1
Net foreign deficit (current account)		-1,5	-1,9		-36,6
Trade balance		-18,4	-16,6		-44,4
Services balance		17,4	15,3		15,7
Other balance		0,1	0,0		-7,6
Current transfer balance		-0,6	-0,6		-0,3
		----	----		----
Net foreign deficit (current account)		-1,5	-1,9		-36,6
Non-oil and non-shipping exports
		2017	2016		2008
Exports "Other Goods"		19,9	18,2		17,0
Imports "Other Goods"		34,3	31,8		46,9
		----	----		----
Balance of goods excluding oil and ships		-14,4	-13,6		-29,9
Ratio: Imports vs. Exports		1,7	1,7		2,8

A truly meaningful analysis of the above development would require statistics at a level which the BoG does not publish (it might be a recommendation for the BoG to provide such a meaningful analysis!). Nevertheless, the following observations can be made with general accuracy.

1) "Exports", "Imports" and "Trade Balance" confuse in the case of Greece because these figures include large and widely fluctuating figures from oil and shipping trade. Still, overall exports went from 22 BEUR to 28 BEUR during the decade while overall imports declined from 66 BEUR to 46 BEUR. That represents a turn-around of 44 BEUR for the decade!
2) "Other Goods" are included in the overall exports/imports and they represent those categories which could be considered as regular trade. Here, exports went from 17 BEUR to 20 BEUR and imports declined from 47 BEUR to 34 BEUR, representing a turn-around of 16 BEUR for the decade!
3) Unclear is what happened to "Services" as revenues in this category declined from 34 BEUR to 28 BEUR. It certainly was not a decline in revenues from tourism (which actually increased from 10 BEUR to 15 BEUR). Instead, the main trigger was a decline in revenues form transportation from 14 BEUR to 9 BEUR.
4) The "Other" category declined on the revenue side from 9 BEUR to 6 BEUR but much more significantly on the expense side from 17 BEUR to 6 BEUR (!). The latter was primarily due to a reduced interest expense.

Last but not least: the import overhang ratio (imports vs. exports) in the category of "Other Trade" had been an incredible 2,8 in 2008, i. e. imports amounted to almost 3-times the volume of exports! It is now down to 1,7, still a high ratio in normal circumstances but certainly defendable in an economy with high services revenues (e. g. tourism), such as Greece.

One could be inclined to see only good news in the above development because the numbers do not show the methods employed in order to achieve them. The 'sledgehammer' was the most important method (i. e. strangle domestic demand so that less money is spent abroad). The risk inherent in that is that as growth returns - without other structural changes - money spent abroad will increase again in line with increased domestic demand. 2017 might already represent a negative omen: growth returned and while exports of "Other Goods" increased, too, imports of "Other Goods" increased much more significantly.