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Economy in Brief

Current Accounts in Central Europe: Services, Income and Transfers Play Significant Role
by Carol Stone December 14, 2006

Four Central European countries reported their October current account results during the day yesterday, December 13. Yesterday in this commentary, we noted that the improvement in Japan's surplus in the month resulted from lower petroleum imports, which were augmented by complementary advances in other current account components. Today, we see that for Poland, Bulgaria, Slovenia and Serbia, developments in those other current account items – services, income and transfers – helped during the summer to mitigate the impact on the current account of larger petroleum imports. But this counterbalance can't be counted on every month and sometimes such increases in merchandise trade deficits are enlarged.

Poland is a good example: its current account deficit widened to $1.23 billion in October from just $82 million in September and $940 million a year ago. As seen in the graph, in most months, the trade portion is only about half the total current account balance. The deficit on income, particularly rising income payments abroad, make for a more complex current account situation.

In Bulgaria, the current account deficit has been steady the last three months at just over $500 million, even as imports of goods have fallen from their August peak of $2,139 million to $1,896 billion. Goods exports also fell and the net on services, generally a surplus in Bulgaria, declined to virtually zero. The moves are small, but they still indicate the intricacy of international trade and financial flows.

Serbia's current account position receives considerable support from transfer payments. As seen in the graph, the deficit on goods and services is heavily offset by transfer receipts. As we point out here, though, the flows do not come in lockstep, so in October transfers went down at the same time as the goods and services balance.

Finally in Slovenia, the trade deficit is offset to some degree by a continuing small surplus in services, although income accounts generally show net outflows and transfers are erratic in both directions.

Monthly Averages
Current Account Balances
SA, Mil.$
Oct 2006 Sept 2006 Aug 2006 Year-Ago
2005  2004 2003
Poland -1,234 -82 -1,192 -940 -427 -891 -386
Bulgaria -527 -509 -539 -311 -255 -122 -87
Serbia (NSA) -330 -132 -334 -344 -174 -244 -161
Slovenia -58 -271 -92 -33 -56 -74 -18
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