August 24th, 2011
by Dirk Ehnts
Econintersect: In yesterday's EL PAIS, new numbers for the Spanish current account are reported - and the news is good. Spain now runs a current account surplus vis-a-vis the other euro zone members, and against the OECD combined as well. This is very important in the light of the underlying economic situation. It should be noted that rising exports are part of the change, with an increase of 18.5% which is higher than that of imports (12.4%). However, increased energy prices are a major part of the increase in the import bill, and countries exporting anything else to Spain will see their markets getting more difficult.
Follow up:However, Spain still runs a current account deficit against the rest of the world, which is perhaps the more important indicator. However, while energy prices are nothing that lies within Spain's control the current account reversal against the other euro zone members is a good sign that some adjustment takes place. It remains to be seen whether a) this trend continues and b) whether a lower price level of tradable goods has been the cause and goes together with lower (real) wages, which would increase the real burden of indebted Spanish households and lead to contractions in consumption while expanding exports.
About the Author
Dr. Dirk Ehnts is a research assistant at the Carl-von-Ossietzky University of Oldenburg (Germany). His focus is on economic integration and economic geography, covering trade, macro and development. He is working at the chair for international economics since 2006 and has recently co-authored a book on Innovation and International Economic Relations (in German). Ehnts has written at his own blog since 2007: Econblog 101. Curriculum Vitae.