Bank of Greece: Positive Airbnb effect on tourism and recovering real estate sectors

The positive effects of the so-called "Airbnb effect" on Greece's recovering real estate sector came under the Bank of Greece's (BoG) scrutiny, with the effects listed in the central bank's recent Interim Report on Monetary Policy 2018, Greek daily Naftemporiki reports.

The interim report makes a particular reference to Greece's growing tourism sector, as well as investments in high-end real estate.

Conversely, low-end properties, residential and commercial, continued to record very low demand in the country, due to restricted liquidity and disappearing disposable incomes by would-be buyers and investors over the past decade.

The Bank of Greece announced that in October 2018, the current account registered a deficit of €871 million, up by €82 million year-on-year, due to a deterioration mainly in the balance of goods, as well as in the secondary income account. By contrast, the services balance and the primary income account improved while tourism revenues grew to 1.41 billion euros from 1.19 billion euros in the same month last year.

It should be noted that changes in the primary and secondary income accounts were limited.

The deficit of the balance of goods grew, mainly due to an increase in the deficit of the balance of goods excluding oil, as the relevant imports rose at a much faster pace than the corresponding exports (at current prices). It should be noted that, at constant prices, total exports of goods increased by 10.9% (non-oil exports of goods rose by 13.5%) and total imports of goods rose by 15.4% (non-oil imports of goods grew by 22%).

The surplus of the services balance increased, which is mainly attributable to an improvement in the travel balance, as non-residents' arrivals and the corresponding receipts increased by 15.6% and 18.3%, respectively. An improvement was also recorded in the transport and other services balance, with sea transport receipts rising by 32% year-on-year.

In the January-October 2018 period, the current account showed a deficit of €2.1 billion, up by €1.6 billion year-on-year. This development is attributable to a deterioration in the balance of goods and the primary income account, which was partly offset by an improvement chiefly in the services balance, as well as in the secondary income account.

The deficit of the balance of goods grew by €2.2 billion, despite the continuing upward trend of exports, as imports also accelerated year-on-year (at current prices). At constant prices, total exports of goods increased by 7.9% (non-oil exports of goods rose by 11.3%) and total imports of goods grew by 7.3% (non-oil imports of goods increased by 10.5%).

The surplus of the services balance rose by €1.2 billion, on account of improvements chiefly in the travel balance and, secondarily, the transport balance, while the other services balance deteriorated. Specifically, non-residents' arrivals and the relevant receipts rose by 10.8% and 9.9%, respectively. Additionally, sea transport receipts also increased, by 14%.

Furthermore, tourism-related revenue for the 10-month period reached 15.6 billion euros against 14.2 billion euros in 2017 and 12.8 billion during 2016.

Lastly, the primary income account showed a deficit, which was larger than in the same period of 2017, mainly due to higher net interest, dividend and profit payments, while the deficit of the secondary income account declined, owing to an improvement in the general government component. 

Capital account 

In October 2018, the capital account showed a deficit, against a small surplus in October 2017, due to a rise in net payments of the other (excluding general government) sectors. In the January-October 2018 period, a surplus was registered, which however was lower than in the corresponding period of 2017. 

Combined current and capital account 

In October 2018, the combined current and capital account (corresponding to the economy’s external financing requirements) showed a deficit of €933 million, up by €152 million year-on-year. In the January-October 2018 period, the combined current and capital account recorded a deficit of €2.0 billion, compared with a deficit of €199 million in the same period of 2017. 

Financial account 

In October 2018, no remarkable changes were recorded under direct investment. 

Under portfolio investment, a net increase in residents' external assets is exclusively due to a rise of €1.1 billion in residents' holdings of foreign bonds and Treasury bills. A net decrease in their external liabilities is mainly attributable to a decline of €950 million in non-residents' holdings of Greek government bonds and Treasury bills.

Under other investment, a net decrease in residents' external assets mainly reflects a decline of €207 million in residents' deposit and repo holdings abroad. A net increase in external liabilities reflects mainly a net rise of €1.7 billion in non-residents' deosit and repo holdings in Greece (the TARGET account included).

In the January-October 2018 period, under direct investment, residents' net external assets and liabilities – the latter representing foreign direct investment – registered increases of €573 million and €3.0 billion, respectively.

Under portfolio investment, a net increase in residents' external assets is chiefly attributable to a rise (of €738 million) in residents' holdings of foreign bonds and Treasury bills. A net increase in their liabilities is mainly due to a rise of €2.4 billion in non-residents' holdings of Greek government bonds and Treasury bills.

Under other investment, a net decrease in residents' external assets is attributable to a decline of €2.7 billion in residents’ deposit and repo holdings abroad and the statistical adjustment related to holdings of banknotes. A net decline in external liabilities reflects mainly a drop of €23.7 billion in non-residents' deposit and repo holdings in Greece (the TARGET account included), which was largely offset by a €20.7 billion increase in the outstanding debt of the public and the private sector to non-residents.

At end-October 2018, Greece's reserve assets stood at €6.5 billion, compared with €6.6 billion in October 2017. 

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