Greece's Current Account Deficit - Forebodings Of The Next Sovereign Debt Crisis?

I wish I had been wrong when, back on July 29 of last year, I projected a dramatic current account deficit for 2022. Alas, I wasn't: Greece posted a current account deficit for 2022 of 20,1 BEUR which is a phenomenal deficit. It also represents about 10% of Greece's GDP, which is also a phenomenal percentage!

There are indeed some good news. Revenues from abroad increased from 68,4 BEUR in 2014 (which had been the best current account year in the past) to 112,7 BEUR in 2022. A phenomenal increase! Record exports and record tourism revenues accounted for that.

But it wouldn't be Greece if expenses abroad would not have increased substantially faster: from 69,6 BEUR in 2014 to 132,8 BEUR in 2022. Imports more than doubled since 2014!

The net result is a deterioration in the current account from a deficit of l,1 BEUR in 2014 to a deficit of 20,1 BEUR in 2022. Notwithstanding all the positive news which surround Greece's performance these days, this deterioration in the current account is a dramatic development!

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Why does the current account matter so much? Because the current account reflects whether a national economy, cross-borderwise, is living beyond its means or not. Whether it is spending more money outside its borders than it earns outside its borders. And if it is spending more money outside its borders than it earns outside its borders, it needs to obtain funding from outside its borders.

Greece currently has no difficulties raising funding from outside its borders. On one hand, Greece will continue to receive billions of Euros from the EU Recovery Fund. On the other hand, Greece has, once again, become a very attractive place for investments. Capital markets seem to have, once again, fallen in love with Greece. Furthermore, Greece has very low debt service until the early 2030's.

Still, a current account deficit is a current account deficit and a current account deficit of 10% of GDP (or worse) is dramatic. If that situation can not be improved, the next dramatic sovereign debt crisis of Greece is already in the calendar. Not this year, not next year. Not even this decade. But if the current account problem cannot be solved, the next bankruptcy of Greece can be expected for the mid-2030's or shortly thereafter.