I know that the adjustments that several European nations are undertaking right now are a touchy and controversial issue but I want to zero in on facts tonight.
The current account adjustment is progressing
quite fast in Southern Europe, admittedly not the first place that springs to
mind when thinking of successful current account adjustments right now.
Of course I’m talking about Spain and Portugal,
whose current account deficits were quite sizable during the run-up to the
current depression. Currently though, their external sectors performance seems stellar.
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| source: Eurostat |
Goods exports’ growth for both of them steadily outperformed the Euro-Area (EA) average after the great trade collapse (i.e.
2009). There are two things that I want to highlight. Firstly, Portuguese goods
exports seem to buck the declining growth trend prevailing in most EA countries. I do not
know whether this will continue to be the case if the slowdown deepens but
their current performance is not something that one should ignore. Secondly,
Spanish goods exports seem to slightly underperform the EA average now that
things appear to slow down (Again I do not know whether this is of significance).
When it comes to services’ exports, both
countries outperformed the EA average again, with Spain being the one that
managed to buck the trend here, until Q1 2012 that is, when it succumbed and
joined the bandwagon.
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| source: Eurostat |
If we look
at quarterly data for the current account balance then the improvement becomes
very much apparent.
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| source: Eurostat |
Of course, both countries' external sectors are
not as large as Ireland's to take up the slack from crumbling domestic demand
but you got to start from somewhere and this is definitely a step in the right
direction for these countries in their respective efforts to find a more
sustainable footing. Admittedly, if the slowdown deepens then the brunt of the
adjustment would have to come from the imports side and this would make it much
more painful…
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