Friday, June 22, 2012

Greece's current account: January-April

The table below shows the development of Greece's current account in the period January-April 2012 relative to the same period the year before (in BEUR):

2011 2012
Revenue from abroad

Exports 5,9 6,7

Services (e. g. tourism) 6,4 6,4

Other income 1,0 1,1

Current transfers 2,8 2,8

---- ----

Total revenue from abroad 16,1 17,0

Expenses abroad

Imports 15,8 14,0

Services (e. g. tourism) 4,7 4,2

Other expense (e. g. interest) 3,4 2,9

Current transfers 1,6 1,5

---- ----

Total expenses abroad 25,5 22,6

Net foreign deficit (current account) -9,4 -5,6

The improvement continues: the current account deficit declined 40% (!) during this period! Imports declined 11% whereas exports increased 13%!

The discouraging fact is that - as before - after 3 or 4 years of crisis and so-called austerity measures, Greece as a country is still spending 1.330 Euros abroad for every 1.000 Euros earned abroad. That is a 33% excess of spending over income. This is much worse when only considering the trade account where Greece is importing 2.090 Euros for every 1.000 Euros which it is exporting!

Two questions stand out.

First, as encouraging as it is to see Greece's exports increasing, the Euro is now near its lowest level versus USD and other currencies since 2008. Could Greece really not make more of an effort to take advantage of this situation and market its exports specifically to non-Euro markets?

Secondly, have structural reforms been made to make sure that imports will not explode again if and when the economy picks up again? The Bank of Greece's answer to this question is "no".

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