Current account deficit gets wider in Jan.-Nov. period

Greece’s current account deficit in the first 11 months of 2002 widened to 7,851 million euros as the country sold fewer of its products abroad but imported more to satisfy strong domestic demand. The current account deficit in the January-to-November period rose by 791 million euros after the trade deficit ballooned to 20,706 million euros, Bank of Greece data released yesterday showed. The strong level of imports and a sharp drop in exports pushed the non-oil trade deficit up to 17,542 million euros, the central bank said. The size of the trade deficit was «worse than expected but it’s not a cause for concern,» said George Spais, equity analyst at Deutsche Bank. With the Greek economy geared toward Germany and Italy, its biggest trading partners, it was only expected that Greece would be affected by the economic slowdown in Europe, he said. The German economy grew by 0.2 percent last year, the slowest pace since 1993, as companies cut investment and laid off staff. Platon Monokroussos, EFG Eurobank economist, said the negative trend constitutes «a worrying development» as it raises the issue of Greek competitiveness and its above-average inflation. «The rising trade deficit is due to a number of factors, among them the sharp jump in the trade-weighed euro, the weak global economic trajectory and the slowdown in Greece’s key export markets. It also points to the weakness in Greek competitiveness,» he said. Monokroussos said the inflow of Community funds is also masking the actual size of the current account deficit. Without this input, the deficit would have doubled to 12 percent of national output. Greece’s robust economic growth last year, expected to have met the official target of 3.8 percent, underpinned the strong level of imports. BoG’s statistics also underscored the continuing disinterest shown by foreign investors in Greece. The inflow of foreign direct investments in the first 11 months of 2002 was a paltry 30 million euros, much of which went into Greek government bonds. This compares with the 546 million invested by Greeks abroad. FDI as a percentage of GDP continues to remain at a very low level, according to EFG Eurobank. In 2000, there was a net outflow amounting to 1.18 percent of national output. This improved to a net inflow equivalent of 1.11 percent of GDP in 2001, but is expected to decline to a net outflow of 0.41 percent in 2002. The bank said disincentives to FDI include the maze of red tape, rigid labor laws and a complex and inefficient taxation system. Monokroussos said the current account deficit is expected to carry over in the first half of this year as the factors underpinning the shortfall last year continue to hold sway. «Generally, all countries show a current account deficit,» said Spais.

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