BoG released data on the Greek balance of payments for July 2012:


What i always keep an eye on is the balance of goods and services excluding oil. This has now turned positive to the order of €1.4bn. This is mainly driven by shrinking goods imports (-10.9%) although expanding exports (+8%) also play a role. The services balance has also been expanding modestly although that is due to lower payments than an expansion of receipts, which have actually dropped from €15.8bn in 2010 (Jan-Jul) to €15.1bn.

The other very positive development is the large reduction in interest payments (mostly as a result of the PSI) which were a bit less than €4bn, compared with €6.8bn during 2011, a reduction of almost €3bn. Any further OSI will lower interest payments even further. By now, the income negative balance is covered by net receipts in the current and capital transfers accounts. As a result, the current account will be mainly driven by the oil balance from now on. During Jan – Jul the latter was -€6.6bn while the current account -€6.46bn. The increase on the special tax on heating oil that will take place in October will definitely lead to an even lower balance compared to last year.

On a yearly basis it is very likely that the current account will settle around -6-6.5% of GDP, more than half compared to the recent past. Still, from a sectoral balances point of view the targeted fiscal primary surplus of 4.5% of GDP will lead to further economic contraction as it will translate to a private sector deficit of 8-10% during 2013-2014. In my view what is needed is a further lowering of interest payments to the official sector (by a drop on the interest rate on the Greek Loan Facility and an exchange of ECB Greek bonds with the new English-law post-PSI bonds) as well as a target of a balanced fiscal primary balance, thus allowing growth to slowly return to the Greek economy. I believe that the currently targeted primary balance will never be reached due to a deepening of the recession.