Current account balance suffers from capital controls

Current account balance suffers from capital controls

The impact on the economy from the capital controls imposed by the government just over a year ago is becoming increasingly apparent.

Data published on Thursday by the Bank of Greece showed that in May, the current account deficit almost trebled on an annual basis due to the reduction in service exports.

The Greek current account balance posted a deficit of 412 million euros in May 2016, up by 272 million euros from May 2015, the data revealed. This was mainly due to the reduction by 442 million of the services balance surplus, primarily because of the fall in net revenues from maritime transport services, which came to 339 million euros, against 672 million euros a year earlier.

Takings from travel services recorded a decline of 10.4 percent year-on-year in May, in spite of the increase in the arrivals of foreign tourists, which amounted to 4.4 percent. Consequently, the travel balance showed a deterioration in May.

In the first five months of the year the balance of current accounts actually recorded an improvement but this is mainly due to the fact that Greece had smaller obligations in interest payment to cover, and paid less towards salaries and pensions, thereby offsetting the losses from travel revenues and exports.

In the period from January to May, the Greek current accounts posted a surplus of 884 million euros, while in the first five months of 2015 they had recorded a deficit of 3.5 billion euros. The surplus of the services balances came down to 1.3 billion euros as a result of the significant shrinking in the net collections from transport, which in turn was mainly due to the limitations from the capital controls.

There was also a decline in net revenues from travel services: The total number of foreign tourism arrivals recorded an annual decline of 1.3 percent in the year to end-May, while travel takings shrank by 6.2 percent. The balance of primary incomes posted a surplus of 1 billion euros – an improvement of 715 million euros from the same period in 2015 – thanks to the reduction in net payments for interest, dividends and profits, as well as for salaries.

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