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Greece sees sharp decline foreign currency inflows from shipping

Greece sees sharp decline foreign currency inflows from shipping
The impact of Greek shipping on a nation’s economy can be seen from data just produced by the Bank of Greece and the Bank of Cyprus.

The Bank of Greece (BoG) has reported a sharp drop in the inflow of foreign currency into Greece from shipping primarily as a result of capital controls and the poor freight markets. The decline started in July following introduction of capital controls in late June, and has picked up since, reported the bank.

According to the Bank of Greece, the reduction in September came to 53%, on the back of a 46% decline in August and 60% in July, compared to the same 2014 periods. On the contrary the Bank of Cyprus has published data showing that in the first six months of 2015 income from shipping activity increased 9.3%, with the bank saying the biggest part of the 2015 increase is due to the presence of Greek shipowners, with a 6% share of the increase.

In the case of Greece, with the lion’s share of foreign currency in the sector coming from oceangoing shipping, it becomes clear the capital controls have had a sinking effect on the foreign account balance and the cash flow of banks. In the first half of the year the inflow had posted an annual increase.

The BoG reports the foreign currency inflow from shipping dropped to EUR598.2m ($750m) in September, against EUR1.274bn in the same month last year. In the quarter of the year the inflow declined by EUR1.7bn in total.

A factor has been the fall in global dry-bulk market rates, which saw the Baltic Exchange Index on 20 November each an historic low. As most Greek-owned fleets comprise dry-bulk carriers it is estimated the current, last quarter of the year, will see a further decline in the foreign currency inflows from shipping.

According to Costas Galatariotis, president of the Limassol Chamber of Commerce & Industry, some 42 Greek shipping companies have registered in Cyprus so far in 2015, potentially giving the island's maritime capital, Limassol, a further boost as it plays a major role in leading Cyprus out of its crisis.

While it appears few companies have actually set up shop in one of the world's leading ship management centres, the BoC reports the first half income from shipping to be to EUR464m, up 9.35% on the second half of 2014, and its highest level in five years.

Though Germany continues to lead the way with 44% of the earnings, down 6% on the 2014 second half, the bank said the biggest part of the 2015 increase is due to the presence of Greek shipowners.

Among new Greek names being linked to Cyprus are Golden Union Shipping / Theodore Veniamis, president of the Union of Greek Shipowners, Enesel / Nicos S Lemos, Sun Enterprises / George S Livanos, Maran Trading Ltd / John Angelicoussis, Chandris Shipmanagement (Cyprus) and Minerva (Cyprus) Ltd / Andreas Martinos.

What is notable is the move by Greeks to re-locate did not really get underway until the middle of this year. If company registration actually turns into an increase in ship management companies locating themselves in Cyprus this can be expected to contribute even more substantially to the economic prosperity of Cyprus in the form of value-added tax, real estate, and other revenues.