To put the accomplishment into the right light, I will this time compare January-July 2012 to the same period of the year 2008, by far the most excessive year for Greece’s external accounts.
|January – July||July|
|Revenue from abroad|
|Services (e. g. tourism)||19,2||15,1||3,6|
|Total revenue from abroad||38,5||32,8||6,1|
|Services (e. g. tourism)||9,8||7,5||1,0|
|Other expense (e. g. interest)||9,5||4,2||0,5|
|Total expenses abroad||59,9||39,2||5,4|
|Net foreign deficit (current account)||-21,4||-6,4||0,7|
To come to the point, this year’s current account deficit was 70% lower than in the same period of 2008! That is an enormous accomplishment overall!
When looking at details, the message becomes somewhat less euphoric.
Exports in 2012 were only 8% higher than in 2008. When considering that Greece must have become quite a bit more competitive since then and particularly when considering that the Euro now trades significantly lower than in 2008, one would have expected a more significant increase in exports. Here is obviously a lot still do do!
The major factor contributing to the improvement in the current account balance were imports. Even though imports declined “only” 35%, the base in 2008 had been irresponsibly high so that the large decline in nominal terms was the primary reason in the improvement of the current account balance. That decline in imports is largely the result of the recession. It must be feared that imports will “explode” again should the purchasing power return to the economy. This is where structural reforms must counterbalance.
It is extremely worrisome to note that, while exports increased by 8%, all other revenue categories (tourism, other income) declined quite significantly. No explanation for the possible cause of that comes to mind. Also, it seems that interest expenses were significantly higher in 2008. Their decline were another important factor in the improvement of the current account balance.
The month of July 2012
The real surprise is that Greece recorded a surplus in the current account for the month of July 2012. The last time this happened was in the month of May 2010.
Actually, if the whole year could be like the month of July, Greece would be a show case for a perfect current account balance: the country showed a large trade deficit because its export base is small but it more than made up for it through services (e. g. tourism). In fact, the suplus in services not only allowed for coverage of all interest payments but also for a surplus!