French payments deficit surges in 2006

PARIS, Feb 16, 2007 (AFP) – The French balance of payments showed a sharply increased deficit in 2006 mainly because the balance of trade in services deteriorated, the finance ministry reported on Friday.

The balance of payments on current account, a key measure of payments into and out of a country, showed a deficit of 25.3 billion euros (33.1 billion dollars) from a deficit of 19.3 billion euros in 2005.

In December alone the balance showed a deficit, on an adjusted basis, of 2.9 billion euros from 2.2 billion euros in November, a figure which was revised downwards.

For many months analysts have commented that France appears to have moved into a structural weakness in its trade and payments balances, suggesting that this may be the result of an erosion of underlying competitiveness.

The trade figures for 2006 showed that the balance of trade in goods showed a deficit of 27.0 billion euros after 25.9 billion euros in 2005.

France is one of the top tourist destinations in the world and earnings from tourism are therefore important to the economy. The balance of payments for travel alone showed a surplus of 8.3 billion euros.

But the data showed that excluding the balance of trade in travel services, the trade in services showed a deficit of 4.9 billion euros, a deterioration of 4.0 billion euros from the figure for 2005.

The ministry said that “from year to year the earnings (under this category) are falling by 4.8 percent while costs increase by 1.9 percent.”

The balance of transfers under the earnings category showed a surplus of 19.9 billion euros after 20.8 billion euros in 2005.

The main surplus item, as in 2005, appeared under the heading of earnings from direct investment to the extent of 18.4 billion euros, followed by an 8.5-billion-euro surplus on transfers of salaries.

Income from portfolio investments showed a deficit of 1.9 billion euros, and the balance of other investment income a deficit of 5.1 billion euros.

Subject: French news