Sunday, August 21, 2016

Greece's Current Account First Half of 2016

Below are the statistics of Greece's current account from January-June 2016, compared with the same period of the previous year. The same comparison is made for the month of June alone. All numbers are in BEUR.

January-June June
2016 2015 2016 2015
Revenue from abroad
Exports 11,6 12,6 2,0 2,2
Services (e. g. tourism) 9,2 12,7 2,9 3,4
Other income 3,6 3,6 0,8 0,3
Current transfers 1,1 1,2 0,3 0,1
------ ------ ------ ------
Total revenue from abroad 25,5 30,1 6,0 6,0
Expenses abroad
Imports 19,9 22,2 3,4 3,6
Services (e. g. tourism) 4,6 6,7 0,8 1,1
Other expense (e. g. interest) 2,5 3,5 0,6 0,6
Current transfers 1,0 1,6 0,2 0,2
------ ------ ------ ------
Total expenses abroad 28,0 34,0 5,0 5,5
Net foreign balance (current account) -2,5 -3,9 1,0 0,5
Trade balance -8,3 -9,6 -1,4 -1,4
Services balance 4,6 6,0 2,1 2,3
Other balance 1,1 0,1 0,2 -0,3
Current transfer balance 0,1 -0,4 0,1 -0,1
---- ---- ---- ----
Net foreign balance (current account) -2,5 -3,9 1,0 0,5

Here is the press release of the Bank of Greece commenting the above results.

At first glance, the figures look dismal: during the first 6 months of 2016, revenues from abroad declined by 4,6 BEUR! The fact that the current account balance registered a healthy improvement of 1,4 BEUR is due to the fact that expenses abroad declined even more than revenues (by 6,0 BEUR).

Much has been written about the poor export performance. Here it must be noted that the above figures are a bit distorted because both, exports and imports, are composed of 3 categories: oil, shipping and "other goods". It is the category of "other goods" which most people mean when they refer to Greece's exports. Below are the statistics for that category:

Exports "Other Goods" 8,9 9,1 1,6 1,7
Imports "Other Goods" 16,0 16,0 2,8 2,8
---- ---- ---- ----
Balance of goods excluding oil and ships -7,1 -6,9 -1,2 -1,1

Both, for the 6 months as well as for June alone, exports declined while imports remained stable. It would obviously be better if it had been the other way around.

Having observed the development of Greek exports for over 5 years by now, I think emphasizing the importance of export growth is a bit like beating a dead horse. It seems unlikely that exports will ever be the growth engine for the Greek economy.

The more I think about it, it may indeed be best for Greece to return to a simple economy à la 1950's and 1960's, i. e. an agrarian economy with simple support manufacturing and an emphasis on exporting the related goods. Of course, that will require investment in food processing plants and the like thereof. And good old tourism and shipping should be the major drivers of growth.


  1. I think you are right regarding the export potential of Greece. While good old tourism may be a driver of growth it is certainly not a driver of tax revenues. It is and old, and wrong, myth that Greek shipping is a driver of any of the two. Greek shipping is anything but Greek, in all aspects.

  2. It might be best for Greece to return to a simple economy à la 1950's and 1960's and maybe to drachma, but won't change anything.

    After the last recapitalization (2015) and the catastrophic elections of 2014 Greek banks suffer more then ever with less 35-40 b € in bank deposits and much more problematic macro dynamism.

    How can Greece improve investment climate and improve current account when there is only limited trust and problematic investment-tax environment?

  3. The conditions simply don't exist in Greece for export-led growth. The appropriate business culture doesn't exist, the appropriate financial system doesn't exist, the appropriate political system doesn't exist, popular support doesn't exist, nothing exists. There is no surprise here. Cutting off external support simply made Greece poorer, it didn't galvanize it to grow it's exports. To be fair though, the whole of the Eurozone pursued austerity in order to galvanize export-led growth. As a result, not only the Eurozone has stagnated, but it also destroyed it's banking system in the process.

  4. Jim Slip sums it up nicely. There is only to add that the missing qualities cannot be cultivated overnight by "jump starting", it requires decades if not centuries. That is of cause if Greece realize that the qualities are missing and desirable. Their tragedy is that the global world does not need Greece in their preferred role as "the middleman".

  5. Q: How can Greece improve investment------------------------------------------?
    A: They can't.