The Spanish trade balance that keeps giving

The thing about Spain’s trade deficit is that its figures look so good analysts tend to feel under pressure and add “but they will not be enough” to take the country’s economy off the hook.

In October, the Spanish trade deficit reached the lowest level in 15 years, with 28.3 percent or just 3.3 percent of GDP. It was 9.4 percent of GDP only five years ago. Excluding the energy bill, the trade balance would be positive by €10.8 billion during the three first quarters of 2012–in 2011, it was -€6.04 billion in the same terms. And there might be more than meets the eye.

During the last ten months, exports increased 4.2 percent while imports fell by -2 percent. “This differentiates the Spanish deficit correction process from other peripheral countries’,” experts at Bankia Bolsa in Madrid said in an investor note, “because in Spain, imports haven’t dropped as much as in neighbouring euro partners.”

Sales to non-European Union markets have expanded by 14.9 percent, compensating a -1.2 percent loss in European share. “It shows that Spanish companies have the capacity to find alternative markets when the usual domestic clients slow down their demand,” Bankia Bolsa explained. “The evolution of the trade balance reflects that Spain’s competitiveness is gaining territory thanks to internal devaluation.”

“Although stocks with high levels of risk will still remain volatile, investors are returning and we would favour more exposure to high-visibility stocks.” Bankia Bolsa commentators forecast that the definitive answer to the much-awaited Spanish bailout will come in the first quarter of 2013, once the government knows the exact amount of public deficit for this year.