ECONOMY

European economic slowdown holding back Spanish exports

Trade deficit doubled in first half of 2014, putting damper on government’s GDP growth forecast

The economic slowdown in Germany, France and Italy is pulling back on Spanish foreign trade. This, together with the ongoing dispute with Russia, resulted in a 1.2% reduction in exports in June.

Foreign trade has now been in the red for three straight months – in the second quarter of the year it dropped 2%.

“The lethargy of the European economy is not helping our exports,” admitted secretary of state for trade Jaime García-Legaz. “If Europe does not grow, it will be hard to reach the export levels of previous years.”

Still, the secretary underscored that Spanish exports have remained stable compared with those of neighboring countries.

“This is the second-best June in the history of Spain’s trade sector,” he said.

This is the second-best June in the history of Spain’s trade sector” Spanish secretary of state for trade Jaime García-Legaz

Exports in June totaled €20.6 billion. In 2008, when the financial crisis broke, exports were €15.6 billion.

Still, foreign sales have slowed down, putting a damper on the government’s GDP growth forecast. García-Legaz did not comment on the issue, even though exports are currently the main driver of the Spanish economy. The secretary played down the relevance of the June contraction, saying domestic demand was now replacing exports as the main driver of Spanish economic growth.

These claims are based on improved economic performance in the second quarter, when the economy grew 0.6%, which stimulated demand and imports. The trade deficit doubled in the first half of the year, reaching €11.8 billion.

García-Legaz said Spain has always had a trade deficit and that the six-month figures will not prevent the national economy from posting a current-account surplus.

The slowdown in exports was mostly the result of fewer sales of industrial equipment, which contracted 4.1%, while imports were driven by the auto industry – Spain exports 90% of its automobile production and imports 70% of all vehicles purchased domestically.