ΒοG: Greek current account deficit in 2018 reaches 5.3 bln€; up 68% yoy

21 February 2019
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The Bank of Greece (BoG) on Tuesday reported a significant worsening of the country’s current accounts deficit for 2018, with the figure increased by 68 percent (yoy) to reach 5.3 billion euros, up from 3.2 billion euros in 2017.

According figures released by Greece’s central bank, the negative development is due to a deterioration in the balance of services and primary incomes, which was only partially offset by an improvement in the services balance and the secondary income account sector.

In a press release on its website, the BoG noted:

“In December 2018, the current account showed a deficit of €1.5 billion, up by €41 million year-on-year. The widening of the current account deficit is attributable to a deterioration of the balance of goods, while the balance of services and the primary and secondary income accounts improved.

The deficit of the balance of goods grew as a result of a worsening primarily in the balance of goods excluding oil and, secondarily, in the oil balance. It should be noted that, at constant prices, total exports of goods decreased by 3.5% (non-oil exports of goods remained unchanged) and total imports of goods decreased marginally (non-oil imports of goods grew by 3.4%).

The surplus of the services balance increased slightly, as a result of an improvement in the transport balance, which is due to a rise of 13.9% in net sea transport receipts compared with December 2017. The improvement in the transport balance was partly offset by a deterioration in the other services balance and the travel balance. With regard to the latter, non-residents’ arrivals and the corresponding receipts rose by 16.8% and 40%, respectively, but the relevant payments grew more strongly (by 53.2%).

Lastly, the improvement in the primary income account is due to a decline in net interest, dividend and profit payments.

In 2018, the current account showed a deficit of €5.3 billion, up by €2.1 billion year-on-year. The widening of the current account deficit is attributable to a deterioration in the balance of goods and the primary income account, which was partly offset by an improvement chiefly in the services balance, as well as in the secondary income account.

The deficit of the balance of goods widened by €2.7 billion, despite the continuing upward trend of exports, as imports also accelerated compared with 2017 (at current prices). At constant prices, total exports of goods increased by 7.1% (non-oil exports of goods rose by 10.3%) and total imports of goods grew by 7.1% (non-oil imports of goods increased by 9.2%).

The surplus of the services balance rose by €1.3 billion, on account of improvements chiefly in the travel balance and, secondarily, in the transport balance, while the other services balance deteriorated. Specifically, non-residents’ arrivals and travel receipts rose by 10.8% and 10.1%, respectively. Transport receipts also increased, by 14.9%.

Lastly, the deficit of the primary income account more than doubled compared with 2017, mainly due to higher net interest, dividend and profit payments, while the deficit of the secondary income account declined, owing to an improvement in the general government component.

Capital account

In December 2018, the capital account registered a €34 million deficit, against a surplus in December 2017, mainly due to a decline in general government net receipts. In 2018, the capital account surplus narrowed compared with 2017, as a combined result of a decline in general government net receipts and a rise in net payments of the other sectors.

Combined current and capital account

In December 2018, the combined current and capital account (corresponding to the economy’s external financing requirements) showed a deficit of €1.6 billion, up by €545 million year-on-year. In 2018, the combined current and capital account recorded a deficit of €4.9 billion, compared with a deficit of 2.2 billion in 2017.

Financial account

In December 2018, under direct investment, residents’ external assets increased by €102 million. The most important transaction was the participation of Alpha Bank in the capital increase of AGI-CYPRE ERMIS LTD (Cyprus). Residents’ external liabilities (non-residents’ direct investment in Greece) increased by €287 million. The most important transaction was the participation of Snam S.p.A. (Italy), Enagás Internacional S.L.U. (Spain) and Fluxys S.A. (Belgium) in the capital increase of the Greek consortium SENFLUGA Energy Infrastructure Holdings S.A. for the purpose of acquiring a controlling stake in DESFA (Hellenic Gas Transmission Operator S.A.).

Under portfolio investment, external assets increased by €719 million, as residents’ holdings of foreign bonds and Treasury bills rose by €560 million, while holdings of foreign equities declined by €145 million. A decrease in residents’ external liabilities is mainly due to a decline of €166 million in non-residents’ holdings of Greek government bonds and Treasury bills.

Under other investment, an increase in residents’ external assets is mainly due to a rise of €186 million in in the outstanding debt of the public and the private sector to non-residents. An increase in external liabilities mainly reflects a rise of €2.8 billion in non-residents’ deposit and repo holdings in Greece.

In 2018, under direct investment, residents’ external assets and liabilities – the latter representing foreign direct investment – posted increases of €753 million and €3.6 billion, respectively.

Under portfolio investment, an increase in residents’ external assets is mainly attributable to a rise (of €1.5 billion) in residents’ holdings of foreign bonds and Treasury bills, almost half of which was offset by a decline in their holdings of foreign equities. An increase in their liabilities is mainly due to a rise of €1.5 billion in non-residents’ holdings of Greek government bonds and Treasury bills.

Under other investment, a decrease in residents’ external assets is attributable to a decline of €3.3 billion in residents’ deposit and repo holdings abroad and the statistical adjustment related to holdings of banknotes (1). A decline in external liabilities reflects mainly a drop of €20.8 billion in non-residents’ deposit and repo holdings in Greece (the TARGET account included), which was offset by a €20.9 billion increase in the outstanding debt of the public and the private sector to non-residents.

At end-2018, Greece’s foreign reserve assets increased slightly year-on-year (€6.6 billion, from €6.5 billion) mainly on account of valuation changes.”

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