French current account deficit up by 500 percent

PARIS, Feb 17, 2006 (AFP) – France had a current account deficit of EUR 34.1 billion in 2005, a five-fold increase compared with the figure for 2004, unadjusted official data showed on Friday.

The main reason for the increase was a deterioration of the trade balance, particularly the balance of trade in goods, said the French finance ministry, which issued the data.

The deepening of the deficit “comes in very large part from trade in goods, for which the balance went from 6.3 billion in 2004 to 26.5 billion in 2005, but also from the deterioration in the balance of other operations”, the ministry said.

As a proportion of gross domestic product, the current account deficit in 2005 measured two percent compared to 0.4 percent in 2004 when the deficit had been EUR 6.8 billion.

The French trade deficit, which includes goods and services, hit an all-time high point in 2005 as imports increased at twice the rate of exports.

The 10.5-percent increase in imports, compared with a 4.7-percent increase in exports, was explained by the increased cost of energy imports which was “the origin of half of the increase in the deficit for trade in goods”, the ministry said.

The current account is a broad measure of a country’s commercial relations with the rest of the world, measuring trade in goods and services along with certain financial transfers.

The balance of trade in services, excluding travel, fell “for the fifth year in a row” to show a deficit of 0.4 billion euros, the ministry said.

The data also revealed that foreign direct investment in France had doubled to EUR 38.3 billion “returning to the level of 2003 after a year of major divestments in 2004”, the ministry said.

French direct investment abroad also doubled to EUR 79.7 billion after a sharp increase at the end of the year.

These transfers are included in the financial account, which showed a surplus of EUR 4.1 billion after a surplus of EUR 323 million in 2004.

The capital account showed a surplus of 0.7 billion euros, a fall of EUR 1 billion compared with 2004.

Subject: French news