February 19, 2013 / 9:46 AM / 7 years ago

UPDATE 2-Greek current account gap shrinks -only one new Ferrari

* Greek 2012 current account gap shrinks by more than
    * Deficit at 2.9 percent of GDP, lowest since euro adoption
    * Drop reflects falling imports and debt payments
    * Greece needs more exports to balance its payments in the
long term

    By Harry Papachristou
    ATHENS, Feb 19 (Reuters) - Greece's current account deficit
narrowed last year to its lowest level since the country joined
the euro, adding to evidence that the economy is slowly
responding to harsh austerity measures.
    The gap narrowed by 73 percent in 2012 to 5.58 billion euros
($7.45 billion), helped by falling imports and lower interest
payments after a sovereign debt cut, the country's central bank
said on Tuesday.
    The bank gave no breakdown on the extent to which import
cuts reflected less purchases of machinery by Greek firms, a bad
sign for crumbling investment levels and chances of a much
needed revival in exports such machines could produce.
    However, one telltale statistic showed how showy lifestyles
are out of fashion in bailed-out Greece. Only one new Ferrari
sports car was registered nationally in the whole of 2012. That,
plus one used Ferrari sold, contrasted with 21 new and 37 used
ones in 2007, the last year before Greece's recession started.  
    The current account deficit shrank to 2.9 percent of gross
domestic product (GDP) in 2012 from 9.9 percent the previous
year - its lowest level since at least 1999, according to
available data.
    "The pace of the adjustment was impressive last year," said
Nikos Magginas, an economist at the country's biggest lender
National Bank.
    The current account balance is a key measure of how 
competitive a nation's economy is and of whether it is living
within its means. The reading had deteriorated during a
debt-fuelled economic boom to a record deficit of 14.7 percent
of GDP in 2008.
    But a severe economic contraction, partly due to austerity 
measures as part of the country's international bailout, has
narrowed the gap and may eliminate it in 2014, according to
government estimates.
    In a further sign of economic adjustment announced last
week, consumer prices stopped rising in January for the first
time since at least 1996, reflecting a plunge of almost a third
in households' real disposable income.
    Most of the improvement in the current account reflected
falling imports, as austerity-hurt businesses and households cut
down on purchases of foreign machinery and consumer goods that
are not produced at home. Imports dropped by 12 percent to 41.6
billion euros, according to central bank figures.
    Interest payments on Greece's sovereign debt dropped sharply
after a 75 percent writedown Athens imposed on private sector
bondholders back in March. The income account balance, which
reflects such payments, narrowed by 75 percent to 2.16 billion
    Tourism, Greece's chief money spinner, was not much help,
falling by 4.6 percent to generate revenues of 10.02 billion
euros on shrinking arrivals from Germany, the country's biggest
tourism market.
    Exports rose by a mere 3.8 percent and the country needed to
do better than that to keep its payments balance broadly
balanced when the economy recovers, economists warned.
    "We need more exports of goods for the correction in the
current account deficit to become permanent," Magginas said.
    Several in-built characteristics of the Greek economy tend
to tilt it towards current account deficits, such as high
dependence on foreign energy sources and imported products which
cannot be easily replaced with domestic ones.
    The share of exports as part of the country's GDP stands at
about 25 percent of GDP, the lowest level among the 17 countries
sharing the euro.
    Greece's foreign exchange reserves stood at 5.5 billion 
euros at the end of December, the Bank of Greece added.
    KEY FIGURES (bln euros)     2012      2011
    December                  -0.534     -2.143
    November                  -0.850     -2.284
    October                   -0.684     -1.469
    September                 +0.775     -1.069
    August                    +1.601     -0.103
    July                      +0.642     -0.880
    June                      -0.274     -1.598
    Full-year                 -5.584    -20.634
    source: Bank of Greece
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