Spain exports drive trade deficit down

Spain exports drive trade deficit down

Spain’s increasing competitiveness fuelled a record rise in exports for the January-October period, driving the trade deficit down 2.7 percent to 20.53 billion euros from a year earlier.

The decline in the ten months to October further consolidated the overall downward trend in the deficit seen so far this year, compared with the substantial swell recorded in the full-year 2014 as the economic recovery fuelled a sharp rise in imports.

Exports grew by 3.8 percent in the period January-October 2015, outpacing the 3.2 percent rise in imports.

Domestic factors like lower labour costs have made Spanish exporters more competitive than many of their European peers. But there a some external factors which have also benefited the country’s trade balance:
• the cheaper euro
• the economic recovery in the eurozone, Spain’s main export partner
• the sharp drop in oil prices.

This third development led to a just over 31 percent decline in the energy deficit in the 10 months to October.

 

AUTO SECTOR TOP PERFORMER

So what sectors are fuelling export growth, one of Spain’s key economic drivers. The automobile industry stands out, benefiting from the fall in labour costs over the last 6 years.

The labour market is an estimated 40 percent less expensive than those of other big car manufacturing countries like Germany.

Auto exports rose 19 percent in the ten months to October, in line with the growth registered in September when the Volkswagen emissions scandal was unveiled.

Nearly 700,000 cars in Spain have been affected by the German auto manufacturer’s trickery, which could weigh on car sales in the coming months, according to some analysts.

Food and beverages also showed strong export growth in January-October, up 8.7 percent, while overseas sales of chemical products rose 6.2 percent.

 

SPAIN EXPORTS OUTPACE EUROZONE

So what is the outlook for Spain’s trade balance in 2016? If the deficit is to continue to decline, much will depend on the sustainability of the eurozone recovery and its continued demand for Spanish goods.

Of its main eurozone peers, only Germany beat Spain in terms of accumulated export growth in the first ten months of 2015, posting a 6.7 percent increase.

In 2014, the eurozone absorbed on average around 50% of Spanish exports, compared with 57 percent in 2007 just before the crisis bit. In January-October this year, 50.5 percent of Spain’s exports headed for the eurozone.

Exports to non-EU destinations, accounting for 35.2% of the total,registered significant growth, with America up 8.7 percent and Oceania up 11.3 percent.

But the threat from economic slowdown in China, along with that in some emerging economies like Brazil, could really begin to weigh on global demand over the coming months.

For information on investment and legal services in Spain, please contact corporate law firm Argali Abogados.

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