A fairly busy week of economic releases confirmed that Greece last year posted its biggest current account deficit since the height of the eurozone crisis in 2011. In other data from the Bank of Greece, private sector deposits recorded their first drop in a year in January — though a seasonal element came into play here — and bank lending to the private sector continued to grow.
Nick of the macro.tragedy blog tweeted this excellent chart, which neatly shows how the current account balance progressed over the course of the year (red line), compared with 2019 (blue line):
Meanwhile, the Finance Ministry released its final numbers for January’s budget execution, which confirmed the primary deficit at 1.47 billion euros for the month. The numbers are barely changed from the preliminary estimate released last week, so there isn’t a great deal to add, but it’s worth noting that the government has begun the process of scaling back expected economic support measures. At the risk of sounding like a broken record, if EU leaders don’t act in concert soon to guarantee member states more fiscal firepower we could be sleepwalking towards another disaster.
Greece’s current account deficit came to 11.2 billion euros in 2020, which should end up around 7 percent of GDP. The biggest driver for this, of course, was the collapse in tourism — a sector which Greek politicians often describe as the country’s heavy industry, but which won’t be doing much lifting for a while.
Private sector deposits fell for the first time in a year in January, a month in which there’s always a seasonal dip. The drop of 1.21 billion euros compares with a fall of 2.16 billion euros this time last year. This year’s decline was mostly driven by corporations, with the household sector’s deposits actually increasing 655 million euros — in January 2020, household deposits fell 967 million euros.
The annual rate of growth in bank credit to the private sector increased to 3.7 percent in January, its highest since February 2010. Still, net lending flows in the month were negative, with a drop of 577 million euros from December.
Retail sales in December fell 12.3 percent from a year earlier, compared with 8.5 percent in November. The average rate of decline in 2020 was 3.8 percent.
Consumer confidence dipped further in February, though economic sentiment overall improved, according to the European Commission’s latest survey. Businesses in construction, services and retail for some reason are feeling better, apparently.
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Next week’s key data
February manufacturing purchasing managers index (IHS Markit)
Elsewhere on the web
Adam Tooze argues again that Europe should go big on fiscal policy. I’m lifting this fantastic chart from Tooze, which in turn he has taken from Unicredit economist Erik Fossing Nielsen. You can find the Unicredit note here.
My colleague Yiannis Mouzakis and Christian Odendahl, chief economist at the Centre for European Reform, have a report out on how Greece can recover from the Covid pandemic.
The European Commission released its ninth post-programme enhanced surveillance report on Greece this week. You can find it here.
Fiona Mullen of Sapienta Economics gives the lowdown on the EU’s East Med conference.
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