ATHENS, Feb 19 (Reuters) - Greece's current account deficit

narrowed last year to its lowest level since the country joined

the euro, adding to evidence that the economy is slowly

responding to harsh austerity measures.

The gap narrowed by 73 percent last year to 5.58 billion

euros ($7.45 billion), helped by falling imports and lower

interest payments after a sovereign debt cut, the Bank of Greece said on Tuesday.

The current account deficit shrank to 2.9 percent of gross

domestic product (GDP) from 9.9 percent the previous year - its

lowest level since at least 1999, according to available data.

The current account balance is a key measure for how

competitive a nation's economy is and on whether it lives within

its means. The reading had deteriorated during Greece's

debt-fuelled economic boom to a record deficit of 14.7 percent

of GDP in 2008.

But a severe economic contraction, partly due to austerity

measures as part of the country's international bailout, has

narrowed the gap and may eliminate it in 2014, according to

government estimates.

The biggest part of the improvement in 2012 reflected

falling imports, as austerity-hurt businesses and households cut

down on their purchases of foreign machinery and consumer goods

that are not produced at home.

Imports, excluding oil products, dropped by 12 percent to

41.6 billion euros, according to central bank figures. Exports

of products, excluding fuels processed by the country's two

refineries, rose by a mere 3.8 percent over the same period to

13.85 billion.

Interest payments on Greece's sovereign debt dropped

sharply after a 75 percent writedown Athens imposed on private

sector bondholders back in March. The income account balance,

which reflects such payments, narrowed by 75 percent to 2.16

billion.

Tourism, the country's chief money spinner, was not much

help, falling by 4.6 percent to 10.02 billion euros. Arrivals

from Germany, Greece's biggest tourism market.

Greece's foreign exchange reserves stood at 5.5 billion

euros at the end of December, the Bank of Greece added.

************************************************************

KEY FIGURES (bln euros) 2012 2011

December -0.534 -2.143

November -0.850 -2.284

October -0.684 -1.469

September +0.775 -1.069

August +1.601 -0.103

July +0.642 -0.880

June -0.274 -1.598

Full-year -5.584 -20.634

-------------------------------------------

source: Bank of Greece

($1 = 0.7490 euros)

(Reporting by Harry Papachristou)

Keywords: GREECE PAYMENTS/

(harry.Papachristou@thomsonreuters.com)(+30 210 33 76 455 or +30 6949 440 106)(Reuters Messaging: harry.papachristou@thomsonreuters.com@reuters.net)

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