Friday, October 18, 2013

Greece's Current Account 2009 - 2013

Per August, the Bank of Greece reported a year-to-date current account surplus of 1,6 BEUR. To really appreciate this number in the historical context, I present below the trend over the last 5 years. Regrettably, there was not enough room for the year 2008, which was historically the 'worst' year in Greece's current account. Had I been able to include it, the trend would have been so much more obvious.

(in BEUR)

January - August

2009 2010 2011 2012 2013
Revenue from abroad

Exports 10,0 10,7 13,2 14,2 15,1

Services (e. g. tourism) 18,6 19,6 19,5 19,3 19,0

Other income 3,0 2,7 2,1 2,6 2,4

Current transfers 4,3 3,9 3,6 4,3 6,2

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

Total revenue from abroad 35,9 36,9 38,4 40,4 42,7

Expenses abroad

Imports 30,6 30,7 32,1 28,5 26,5

Services (e. g. tourism) 9,4 10,2 9,6 8,5 7,4

Other expense (e. g. interest) 9,2 7,9 7,6 4,4 4,8

Current transfers 2,8 3,0 2,7 2,7 2,4

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

Total expenses abroad 52,0 51,8 52,0 44,1 41,1

Net foreign deficit (current account) -16,1 -14,9 -13,6 -3,7 1,6

The current account went from minus 16,1 BEUR in 2009 (in 2008 it was even 21,8 BEUR!) to plus 1,6 BEUR during the first 8 months of the year. In case somebody doesn't get the message, that's a turn-around of 17,7 BEUR! Below are a few observations.

1. The turn-around is composed of 6,8 BEUR on the improved revenue side and 10,9 BEUR in the reduced expense side. That's actually quite a positive trend because, until not too long ago, the improvement in the current account had come almost exclusively on the expense side.
2. On the revenue side, it's mostly increased exports which accounted for the improvement. However, note the export improvement has come only in the last 3 years. Could that mean that Greece's export structure is indeed improving but it only took a while until the results showed up? Also, in 2008, exports were 13,2 BEUR, so relative to that years the increase was much lower. When considering that the Euro devalued against third currencies about 20% during this time (i. e. Greek products became cheaper against third currencies) and Greek labor costs declined substantially during this time (i. e. 'more competitive'), one would thing that there should be quite a bit more of export potential as the Greek domestic productive capacity adapts to new opportunities.
3. What is surprising on the revenue side is that services remained kind of flat. Tourism is included in services and tourism should have had greater potential during this time.
4. On the expense side, reduced imports do not appear quite as important as one would expect from published news that Greek demand was 'killed' during the time. There should be quite a lot of potential to reduce imports and substitute them with domestic production.
5. Quite noticeable is the decline in services. Again, tourism is included here and Greeks apparently reduced their offshore tourism.
6. Finally, other expense has come down significantly. Interest expense is included here and this would suggest that the various restructurings of Greece's debt (PSI; lower rates) DID have a positive effect. After all, interest expense almost haved whereas debt increased during the period.


  1. And an 8th observation which you imply in "Thoughts On The EU's Four Freedoms'. To make specifically imports which have a target to create value internally eg industrial equipment. Conclusion, this is "bleeding current account" not a smart one. The exports do not increased 20-25% for a year so as to indicate a significant import substitution and investment approach from people outside. McKinsey's plan "Greece 10 Years Ahead" was forgotten, a bit. However a new one will be presented soon by government Fin Min and Development Min!
    Her Klaus don't loose hope and positivism!

    PS: Ireland has a phenomenal trade balance, but for 2013 in bordeline recession with increased 15-20% debt and "confusing" budget deficit.


  2. 60% of greek imports come from Germany. You think Germany will allow these to be reduced?
    This is not unlike Greece having to buy billions of unneeded german & french armaments as a condition of the first bailout, 2010.

    1. I can see that your question is valid when it comes to imports by the state (such as arms). That can be controlled by governments. But as regards everything else, I just don't see how German/Greek governments can influence imports/exports by private parties within a free trade scenario. That's why I think that, at least temporarily, free tade should move a bit in the direction of 'managed trade' whereby the management takes the form of incentives.

    2. Again another myth, according to Invest in Greece, their imports in 2012 were, EU-46%, Russia-12%, Germany-9%, Italy-8%, Saudi Arabia-5%, China-5%, Netherlands-5%, France-4%.
      Shall we take the one about how Greek profligacy after entering the EURO zone was driven by higher imports from Germany. Greece was Germanys export partner number, 19 in 1990, 24 in 2000, 27 in 2008. I don't have later figures but can assure you that they have dropped further.
      Lennard Schorlemmer

    3. Lennard
      Funny you should mention that myth. I once wrote this article about it: