Research Dept. News
|
|
|
|
Monthly Report, num 331 - January 2010
|
|
|
Spain: overall analysis - Foreign sector
|
|
|
|
|
Current deficit continues to fall
|
|
Current balance deficit falls in September to 6.2% of GDP.
|
|
The current deficit for the month of September was 4,400 million euros, 45.6% lower than the same month in 2008, representing the fourteenth year-on-year drop in fifteen months. This meant that the current imbalance accumulated over the last twelve months fell by 40.6% compared with the previous year, totalling 65,270 million euros, equivalent to 6.2% of gross domestic product (GDP). Although still high, this figure is more than four percentage points lower than the maximum reached in June 2008. This falling trend in the deficit is expected to gradually diminish over the last months of 2009, ending up between 5.0% and 5.5% of GDP.
|
|
Income balance deficit is lower in the third quarter.
|
|
Although this new drop in the current balance is in line with the others recorded in 2009, differences can be observed in how its components have fared. During the first half of the year, the drop in current imbalance was caused almost entirely by changes in the trade deficit. However, the reduction in the income balance deficit in the third quarter, namely 4,803 million euros, accounted for more than a third of the adjustment in the current imbalance thanks to the strong reduction in salary paid abroad. The following graph clearly shows this shrinkage in the income balance in the third quarter.
|
|
|
|
|
In addition to the smaller fall in the deficit for the balance of goods, due to a similar decline in both imports and exports, and to the compensating effect of the income balance, of note is the 3.3% reduction in the surplus of the services balance compared with September 2008. This is the result of the decline in the tourism component, where the drop in revenue was greater than the drop in payments, although they posted lower year-on-year falls of 10.0% and 16.0% respectively.
|
|
Financing needs at similar levels to 2005.
|
|
In spite of the shrinkage in the capital account surplus, which came very close to zero, the improved current deficit reduced financing needs by 43.2% in September 2009 compared with the same month last year. Over a timescale of twelve months, financing needs fell by 39.7%, reverting to levels similar to those of 2005 in relation to GDP (5.8%). From the perspective of institutional sectors, this reduction was caused by trends in household and corporate net savings, which offset the higher government debt over the last year.
|
|
|
|
Consequently, the economy's two main sources of financing saw significant reductions. On the one hand, the net liabilities of the Bank of Spain fell during the first nine months of the year by 25.5% due to banks resorting less to the liquidity auctions of the European Central Bank.
|
|
Short-term investment falls 92% in the first nine months of 2009.
|
|
However, funds taken up by resident sectors fell further in this period, by 58.4%. The biggest change was in short-term investment with a drop of 92.2%. This highlights how traditional credit markets are getting back to normal, leaving behind the financial turbulence that appeared as a result of the subprime crisis. The main net inflows of capital in this period came from portfolio investments due to the increase in entries of funds from abroad.
|
|
|
You can susbcribe now to be nofified by email every time the Monthly Report is updated in the internet.
|
All documents are in Adobe Acrobat format (PDF).
To view a document in PDF format you need the Adobe Acrobat Reader. If you don’t have it already loaded on your computer, you can donwload it now.
|
|
Direct link to the Research Dept. in your mobile
We'll send you a free SMS with the link
|
