Spain Reports Positive Balance Of Trade

As Spain battles to overcome the chaos left behind when a speculative building boom and property bubble burst at the height of the global financial crisis, plunging the banking sector into crisis, there is a ray of good news. For the first time in more than forty years; since 1971, Spain has posted a trade surplus. The difference in the value of goods which Spain exported to what the nation imported March was €634.9 million.

You may wonder how any nation can “live beyond its means” for forty-two years. The balance of payments for a nation must be equal to zero when all sources of revenue and expenditure are considered; to achieve this, a nation may need to raise funds to meet its outgoings. In essence, this is where the debt mountains that beset most of the industrialised world have come from. Debt reduction measures in Europe are aimed at bringing the deficits in line with Eurozone convergence targets which state that the deficit should be constrained to a maximum of 3% of GDP. The fact that the target level is positive means that nothing is being done, for the moment at least, to tackle the amassed public debt. In the USA, some $220 billion is spent each year just servicing existing debt; the equivalent of 1.4% of GDP.

Spain is still struggling with record unemployment of 26.7%, compared to slightly less than 8% in 2007 before the crisis. This means that the government is receiving less revenue in income tax and paying out more is social security benefits. The March trade surplus was largely due to a big fall in the value of imported goods which were down by 15% on the February figure. The level of exports increased by 2% to a value of €20.2 billion, despite a fall of 8.1% in Spain’s exports to other EU member states. Spain is trying to drive exports to other markets such as the USA, Middle East and Africa currently, to supplement weak European demand.