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Current account deficit shrinks further, lifting economy

The Greek economy’s current account deficit fell to 2.1 percent of gross domestic product, or 4.1 billion euros, in the year’s first 10 months, according to data released on Friday by the Bank of Greece, while industrial turnover and new orders statistics also gave some grounds for optimism.

The reduction in the current account deficit amounts to an impressive 74.4 percent compared to the same period in 2011, when it had totaled 16.2 billion euros, or 7.7 percent of GDP. For October alone the deficit came to 684 million euros, down from 1.4 billion in October 2011.

The major decline in imports of various products, the containment of fuel imports and the drastic cut in interest payments thanks to the debt restructuring (PSI) were the main factors in the reduction of the deficit.

The BoG data show that the target which had been set for reducing the current account deficit to 8.2 percent of GDP this year (from 11.7 percent in 2011) has not only been achieved but the figures will be even better, offering a much-needed boost to the country’s battered economy.

The trade deficit was reduced by 25.3 percent in the January-October period this year from the same period in 2011. Exports grew by 7 percent mainly thanks to the increase in fuel exports (17.2 percent). By contrast, imports have shown an 11.7 percent decline due to the large drop in the entry of a variety of goods into the country(14.4 percent) on the back of a decrease in consumption, and in payments for the acquisition of ships (56.7 percent).

The growth of fuel imports was contained to a remarkable extent, as it amounted to no more than 3.9 percent year-on-year, while in the first 10 months of 2011 there had been a 25.1 percent increase from the same period in 2010.

Cash inflows from tourism shrank by 4 percent to 9.7 billion euros and takings from shipping contracted by 3.8 percent on an annual basis. However, the crisis has led to a decrease in the number of trips that Greeks make abroad, as the money that left the country for tourism purposes declined by 19 percent year-on-year in the January-October period.

The positive impact of the private sector involvement in the debt restructuring is now clear: The interest that Greece paid to service its debt in the year to October reached 4.4 billion euros, against 9.3 billion in the same period last year, representing a decline of 52.5 percent. Foreign direct investment showed a net inflow of 1.8 billion euros, against a net outflow of 884 million in the first 10 months of 2011.

Another positive sign for the Greek economy came on Thursday from the October data on industrial turnover and new orders, compiled by the Hellenic Statistical Authority (ELSTAT). The general index of industrial turnover (the sum of the domestic and external markets) showed a 17.3 percent increase on an annual basis, after an 8.2 percent decline shown in October 2011 compared with October 2010. The average industrial turnover index for the 12 months from November 2011 to October 2012 showed a rise of 3.2 percent from the previous 12-month period.

The increase shown in October is attributed to a significant extent to the 18.1 percent growth in the turnover index of manufacturing industries, particularly of oil and coal products, basic pharmaceutical products, and machinery and other types of equipment.

October also witnessed an 11.6 percent yearly increase in new orders in the industrial sector, provisional ELSTAT data showed, against a 16.2 percent decline in October 2011 from the same month in 2010.

ekathimerini.com , Thursday December 20, 2012 (22:35)  
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