Business News : Ailing demand shrinks Greek current account gap

ATHENS (Business News) - Greece's current account deficit narrowed by close to a fifth in March, data showed on Wednesday, reflecting a sharp drop in imports as the country's austerity-hit consumers tighten their belts.

The deficit dropped 17.3 percent to 2.13 billion euros ($ 2.69 billion) compared with March 2011, the Bank of Greece said.

The country's high current account gap, which eased to 9.8 percent of gross domestic product last year from 10.5 percent in 2010, reflects eroded economic competitiveness, partly the result of years of wage increases above productivity.

"The pace of narrowing ... slowed compared to the first two months of the year due to a rise in fuel imports," said economist Nikos Magginas at National Bank.

He expects the gap to shrink further as soft domestic demand conditions endure. But the pace of the decline could slow if tourism revenues turn out weak this year.

Tourism receipts were down 11.2 percent year-on-year in March, with foreign arrivals showing a 12.7 percent drop, the centra l bank said.

The central bank sees the current account deficit narrowing to about 7 percent of GDP this year, while the OECD in its latest outlook projects it at 7.6 percent.