Greece ’s January-June 2014 current account deficit drops

According to data provided by the Bank of Greece, the country’s current account deficit dropped 54% yoy to EUR1.1bn in the January-June period from EUR2.4bn a year ago.

Although the underlying trade balance (goods only, ex-oil & ships) was roughly unchanged (better by just EUR0.2bn yoy), the bulk of the yoy improvement should be attributed to a higher (by EUR1.2bn) surplus in services (reflecting tourism strength, with arrivals +14% yoy and tourism receipts +16% yoy), increased (by EUR0.4bn) current transfers (mostly receipts of EU structural funds) and a better incomes balance (mostly lower interest payments). These more than offset a sharply widened shipping balance (EUR1.6bn deficit vs EUR0.6bn a year ago) due to increased ship-building capex.

For June 2014 alone, Greece posted a EUR1.4bn current account surplus (vs EUR0.9bn a year ago) mostly benefiting by strong tourism (services surplus up EUR0.4bn yoy). Remember that Greece posted a EUR1.2bn current account surplus in 2013 (or 0.7% of GDP) compared to a EUR4.6bn (2.4% of GDP) deficit a year ago, highlighting progress in addressing the economy’s external imbalances and benefiting from some EUR2bn SMP profits returned by ECB/national central banks.

This was the first time in decades (allegedly since 1948) Greece records a surplus on an annual basis: as late as in 2008, the deficit was no less than EUR35bn or 15% of GDP.