Greek current accounts deficit of €3.8 billion in H1 2018

22 August 2018
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The Bank of Greece this week released balance of payments figures for up until June 2018, which showed a signficant increase in the current account deficit for H1 2018, to the tune of 3.8 billion euros, up by 555 million euros from the corresponding period of 2017.

In an announcement, the BoG reported:

In June 2018, the current account registered a surplus of €210 million, down by €527 million year-on-year, as a result of a deterioration principally in the balance of goods and, to a lesser extent, in the primary income account, which was partly offset by an improvement in the services balance and in the secondary income account.
The deficit of the balance of goods rose by €535 million to €2.0 billion, as imports increased more than exports. This development is mainly attributable to a worsening in the oil balance (also due to higher oil prices) and, secondarily, in the non-oil balance. Exports of goods rose by 9.9% at constant prices, while non-oil exports grew faster, by 16.1%, at constant prices.
The surplus of the services balance rose by €313 million, which is almost entirely attributable to an improvement in the travel balance. Specifically, non-residents’ arrivals increased by 22.3% in June year-on-year and the corresponding receipts grew by 16.0%. A smaller improvement was seen in the transport balance, exclusively on account of an increase in net sea transport receipts. On the other hand, net receipts from other services declined.
Finally, in June 2018 the primary income account worsened, while the secondary income account improved.
In the first half of 2018, the current account showed a deficit of €3.8 billion, up by €555 million year-on-year. This development was due to an increase in the deficit of the balance of goods (mainly) and a decline in the surplus of the primary income account. By contrast, the services balance and the secondary income account improved.
The deficit of the balance of goods grew, chiefly owing to the higher net oil import bill, mainly as a result of higher oil prices. The non-oil balance also worsened, but to a smaller extent. As regards the non-oil balance of goods, the relevant exports rose by 13.7% (12.6% at constant prices), outpacing the corresponding imports, which grew by 9.3% and 9.2% at current and constant prices, respectively. Nevertheless, the rise in imports in absolute terms was stronger than the rise in exports, resulting in a higher deficit.
The surplus of the services balance grew by €415 million in the first half of 2018 year-on-year. Specifically, in the January-June 2018 period, non-residents’ arrivals and the corresponding receipts showed increases of 19.1% and 18.9%, respectively.
Lastly, the surpluses in the primary and secondary income accounts showed a decrease and an increase, respectively.

Capital account

In June 2018, the capital account worsened year-on-year, while in the January-June 2018 period, the capital account surplus decreased by €160 million year-on-year.

Combined current and capital account

In June 2018, the combined current and capital account (corresponding to the economy’s external financing requirements) showed a surplus of €193 million, down by €653 million year-on-year. In the January-June 2018 period, the combined current and capital account showed a deficit of €3.6 billion, up by €716 million year-on-year.

Financial account

In June 2018, residents’ net external liabilities stemming from non-residents’ direct investment in Greece increased by €308 million, without any noteworthy transactions.
Under portfolio investment, a net increase in residents’ external assets is mainly attributable to a rise of €396 million in residents’ holdings of foreign bonds and Treasury bills. A net decrease in their liabilities is mainly due to a drop of €815 million in non-residents’ holdings of Greek government bonds and Treasury bills.
Under other investment, a net decrease in residents’ external assets is mainly attributable to a fall of €3.1 billion in residents’ deposit and repo holdings abroad and to the statistical adjustment related to holdings of banknotes.(1) A net decline in liabilities reflects principally a decrease of €2.9 billion in non-residents’ deposit and repo holdings in Greece (the TARGET account included), as well as, secondarily, the statistical adjustment related to holdings of euro banknotes.
In the January-June 2018 period, under direct investment, residents’ net external assets rose by €229 million and residents’ net external liabilities, which represent non-residents’ direct investment in Greece, increased by €2.0 billion.
Under portfolio investment, a net decrease in residents’ external assets is chiefly attributable to a decline of €1.6 billion in residents’ holdings of foreign bonds and Treasury bills. A net increase in their liabilities was mainly due to a rise of €4.0 billion in non-residents’ holdings of Greek government bonds and Treasury bills.
Under other investment, a net decrease in residents’ external assets is mainly attributable to a fall of €4.2 billion in residents’ deposit and repo holdings abroad and, secondarily, to the statistical adjustment related to holdings of banknotes.(2) A net decline in liabilities reflects chiefly a drop of €14.2 billion in non-residents’ deposit and repo holdings in Greece (the TARGET account included), which was partly offset by a €5.4 billion increase in the outstanding debt of the public and the private sector to non-residents.
At end-June 2018, Greece’s reserve assets stood at €6.4 billion, compared with €6.3 billion at end-June 2017.”

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