Friday, August 23, 2013

Greece's Current Account: January-June 2013

These numbers come from the Bank of Greece (in EUR millions):


2012 2013
in %
Revenue from abroad

Exports 10.399 11.066

Services (e. g. tourism) 11.495 10.902

Other income 1.587 1.619

Current transfers 3.581 3.780

-------- --------

Total revenue from abroad 27.062 27.366

Expenses abroad

Imports 21.475 19.333

Services (e. g. tourism) 6.512 5.402

Other expense (e. g. interest) 3.943 3.660

Current transfers 2.043 1.854

-------- --------

Total expenses abroad 33.973 30.249

Net foreign deficit (current account) -6.911 -2.883

A reduction of 58% in the current account deficit is, on the surface, a phenomenal improvement. 'On the surface' because - as I have pointed out on several occasions before - the improvement comes primarily, if not almost exclusively on the expense side and not on the revenue side. Fixing a financial problem only through the expense side generally does not work very well. 

Yes, exports have again increased over the previous year, and the year 2011 had been quite good, too. But exports are still not very much over the level of 2008. With so much EUR-devaluation against third currencies since then and with so much internal devaluation one would expect much better results.

In 2008, total expenses were 101 BEUR. So far this year, they are running at an annual rate of 60 BEUR. That is an enormous improvement! Most of the improvement came on the import side which would principally be excellent if it meant that less money is 'wasted' on imports and more domestic production is generated. That was not the case in Greece. Instead, the import collapse came as a result of collapsing domestic demand.

So where is the good news?

The good news is that the terrible current account deficits of the 2000's have been brought under control. 2013 will in all likelihood be the first year in a long time where Greece will have a surplus in the primary current account (i. e. before interest). That is an enormous plus.

The bad news is that the price for these good news had to be unemployment. This unemployment will turn into permanent unemployment if there is no increase in domestic economic value creation. 

Greece is now in the curious situation where a good thing per se (i. e. current account under control) may very well turn out to be a bad thing for the economy. A balanced current account means that there are no net capital imports. But Greece will have to be a net importer of capital - hopefully in the form of foreign investment - in order to finance the necessary growth.

A current account deficit is not bad per se; it all depends what caused the deficit. During the 2000's, much of Greece's horrendous current account deficits was caused by excessive imports of consumption goods. If a future current account deficit were to be caused primarily by the importation of machinery & equipment for new domestic manufacturing, that would indeed be a good thing for the Greek economy.


  1. Yes, on the surface -- as you say. The most remarkable thing is how services are doing. As I consider tourism to be the main service, then the upbeat propaganda from Samaras et al. looks very suspicious. Admittedly there is some lag here, but even so...

    Oh, and transfers are looking good. In other words, donations from relative in richer countries...

    Overall, the current account is indicative of a very bad situation.

  2. I just saw this article in Ekathimerini which says that Greek June-exports posted worst performance in 3 years.