Bank of Greece: Greek current account balance turned negative in 2016

Greece’s current account balance showed a deficit of 1.1 billion euros in 2016, against a surplus of 206 million in 2015, the Bank of Greece said on Monday.

The central bank, in a report, said that this development was mainly attributed to a decrease in the surplus of the services balance, which was not offset by a reduction in the deficit of the balance of goods, resulting in a deterioration of the overall balance of goods and services. Overall, the value of exports of goods and services declined by 6.1 pct in the year, while the value of imports decreased by 4.2 pct. Moreover, the primary and secondary income accounts worsened.

In 2016, the balance of goods showed an amelioration of 649 million, which is attributable to the reduced deficit of the oil balance (down by 1.4 billion euros) and to lower net payments for purchases of ships (down by 290 billion) in comparison with 2015. By contrast, the deficit of the balance of goods excluding oil and ships grew, chiefly on account of an increase in the value of imports, which was larger than the rise in the value of exports.

It should be noted that, at constant prices, total exports of goods rose by 6.0 pct, reflecting mainly a rise in the volume of oil exports, while exports of goods excluding oil and ships also grew by 3.9 pct.

The surplus of the services balance dropped by 1.6 billion euros in comparison with 2015, mainly due to a significant decline (of 1.2 billion) in net transport receipts, which is largely attributable to capital controls. Net travel receipts also recorded a fall (of 878 million euros). Total non-residents’ arrivals increased by 5.1 pct, while the corresponding receipts declined by 6.4 pct. These developments were partly offset by an improvement in the other services balance, the surplus of which more than doubled. The primary income account showed a surplus of 750 million in 2016, down by 276 million in comparison with 2015. This deterioration is attributable to higher net interest, dividend and profit payments and lower net receipts under other primary income. Finally, the deficit of the secondary income account increased by 71 million, on account of higher net general government payments, which were partly offset by higher net receipts of the sectors other than general government.

In 2016, residents’ assets from direct investment abroad declined by 622 million euros, while the corresponding liabilities, that represent non-residents’ direct investment in Greece, increased by 2.8 billion, against a rise of 1.0 billion in 2015.

Under portfolio investment, an increase in residents’ external assets is mainly attributable to a rise of 9.8 billion euros in residents’ holdings of foreign bonds and Treasury bills, which was partly offset by a decrease of 2.7 billion in residents’ investment in foreign equities. A drop in residents’ external liabilities is mainly attributable to a fall in non-residents’ holdings of Greek government bonds and Treasury bills. Under other investment, a decline in residents’ external assets largely reflects a decrease of 9.7 billion euros in resident credit institutions’ and institutional investors’ deposit and repo holdings abroad, and a drop owing to the statistical adjustment related to holdings of euro banknotes (down by 5.7 billion). On the liabilities side, a drop was recorded, which is mainly attributable to a decrease of 9.1 billion in non-residents’ deposit and repo holdings in Greece (the TARGET account included) and to the effect of the statistical adjustment (down by 6.3 billion). These developments were partly offset by a 6.8 billion increase in the outstanding debt of the public and the private sector to non-residents.

At the end of December 2016, Greece’s reserve assets stood at 6.5 billion euros, compared with 5.5 billion at the end of December 2015.