Greece’s current accounts deficit shrank by 24.3 pct in the first quarter of 2011, compared with the same period last year, the Bank of Greece said on Monday.

The central bank, in a monthly report, said that in March 2011, the current account deficit decreased to 2.604 billion euros, down from 2.951 billion in March 2010. The reduction in the deficit reflects a considerable improvement in the trade balance, which more than offset an increase in the income account deficit and the deficit of the current transfers balance and a decline in the surplus of the services balance.

The improvement in the trade deficit reflects the continuing rebound in receipts from exports of goods excluding oil and ships, which grew by 17.0 percent, as well as a decrease in the corresponding import bill (down by 9.5 percent year-on-year). In addition, the net import bill for both oil and ships declined.

The surplus of the services balance contracted, as a result of lower net transport receipts and higher net payments for “other” services. By contrast, net travel receipts rose, although they were low (29 million euros in March 2011, in comparison with 7 million euros in March 2010). Gross transport receipts (mainly from merchant shipping) fell by 18.7 percent, while the corresponding payments declined by 22.3 percent.

The income account deficit widened by 252 million euros or 41.6 percent, almost exclusively due to a rise in net payments for interest, dividends and profits by 247 million (the largest part of which concerned interest payments on loans granted under the support mechanism for the Greek economy).

Finally, the current transfers balance showed a deficit of 122 million euros, compared with a deficit of 87 million in March 2010, chiefly as a result of increased net general government payments.

In the January-March 2011 period, the current account deficit fell by 2.4 billion euros or 24.3 percent year-on-year, to 7.3 billion. This development reflects primarily a large increase of 2.0 billion euros in current transfer receipts to the general government sector (mainly from the EU) and, secondarily, a 0.6 billion euros decline in the import bill excluding oil and ships, as well as a 0.4 billion euros rise in the corresponding export receipts.

In particular, the overall trade deficit shrank by 612 million euros, as a result of a 1.051 billion decrease in the trade deficit excluding oil and ships and a 196 million fall in net payments for purchases of ships, which more than offset a 635 million rise in the net oil import bill. It should be noted that receipts from exports of goods excluding oil and ships rose by 16.2 percent, while the corresponding import bill declined by 8.8 percent.
The 48 million-euro decrease in the surplus of the services balance reflects lower net transport receipts, which were partly offset by lower net payments for “other” services, while net travel payments did not show any remarkable change. Travel spending in Greece by non-residents grew by 4.7 percent in comparison with the first quarter of 2010 (non-residents’ arrivals rose by 13.1 percent during the same period), while travel spending abroad by residents of Greece rose by 4.0 percent. As a result, net travel payments fell marginally (by 1.6 million).

The income account deficit rose by 182 million year-on-year, almost exclusively due to higher net payments for interest, dividends and profits (up by 9.0 percent).

Finally, the current transfers balance showed a surplus of 1.235 billion, compared with a deficit of 737 million in the corresponding period of 2010, mainly as a result of an increase in EU transfers to general government which concerned direct aid and subsidies under the Common Agricultural Policy.