Since January 2014 Greece’s trade balance has stopped shrinking and is widening again. But what were the driving factors behind that “counter-intuitive” development?
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| source: ELSTAT |
Well, this was driven mostly by an increase in imports but also, to a lesser degree, by a dip in exports.
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| source: ELSTAT, own calculations |
What is noteworthy is the fact that the
catalyst for the aforementioned increase in imports was non-oil imports (after
all crude prices dipped significantly during the June-December interval) which
means that demand by the end-consumer and/or firms picked up (albeit only rather
slightly).
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| source: Eurostat, own calculations |
On the other hand, the continuing weakness in
Greece’s merchandise exports is worrying. It remains to be seen whether the EUR’S
significant drop will contribute towards the strengthening of exports (of
course we should not forget factoring in that thingy called external demand here).
To wrap this up, Greece’s trade balance widened
again in 2014, driven mostly by increasing imports, while exports were weak. What’s
more we should wait and see whether the weakening EUR will help Greek merchandise
exports. After all, the interval after which the J-Curve effect is believed to
start kicking in is approximately 6 months (and the EUR’s dip started in June).
I, for one, won’t be holding my breath over that particular prospect though…
