C/A gap shrinks; outlook uncertain

Greece’s huge current account balance-of-payments deficit fell by 7.4 percent to 8.35 billion euros in the first quarter this year, but economists said it is too early to talk of any sustained decline. Last year the current account gap rose to 14.1 percent of gross domestic product (GDP), topping economists’ expectations and threatening long-term growth and jobs, from 11.1 percent in 2006. Bank of Greece data released yesterday showed the current account deficit in March was 3.52 billion euros, up from 3.09 billion euros a year earlier. In February, the deficit had plunged to -1.84 billion from -3.16 billion the year before. «Overall, despite the small improvement in the year to March over the same period a year earlier, we do not see much room for significant improvement for the year as a whole in view of elevated oil prices and a strong euro,» said economist Platon Monokroussos at EFG Eurobank. The economy expanded at a 3.6 percent annual clip in the first quarter, keeping the previous quarter’s pace, but final consumption eased to a 2.5 percent pace from 4.6 percent in the previous three months. Greece’s economy, representing about 2.5 percent of the eurozone, has been expanding faster than its euro partners, which has boosted demand for imports. An inadequate domestic savings base to finance consumption has resulted in increased foreign borrowing. «Stabilization is conditional on tourism receipts being maintained at previous years’ levels. Tourism is not expected to be much better this year than last,» said economist Nicholas Magginas at National Bank. (Reuters)