May 17 (Bloomberg) -- Spain posted its first monthly trade surplus on record in March as imports slumped, after government budget cuts undermined domestic demand.
The country’s trade balance in March swung to a surplus of 634.9 million euros ($818 million) from a deficit of 1.18 billion euros in February and 3.2 billion euros a year earlier, data released today by the Trade Ministry show. That is the first surplus since records began in 1971, Deputy Trade Minister Jaime Garcia-Legaz said at a press conference in Madrid.
Prime Minister Mariano Rajoy is seeking to convince European Union partners that efforts to force banks to provision real estate-linked losses, cut the EU’s widest budget deficit and reduce labor costs may end a six-year slump in the euro area’s fourth-biggest economy this year.
“Products made in Spain are replacing imports,” said Garcia-Legaz, who forecast the surplus will continue to grow. “That means products made in Spain are better and we are creating jobs inside Spain instead of outside Spain.”
Imports dropped 15 percent in March from the same month a year ago while exports rose 2 percent. The trade deficit for the first three months of the year narrowed 62 percent from a year earlier to 4 billion euros.
Spanish exports last year rose to the highest level on record even as the country’s main trading partners in the euro zone battled recession. The government changed labor rules to give companies more power to cut wages, fire workers or modify their jobs as they struggle to regain the competitiveness lost during a decade-long economic boom. The government forecasts that’ll help the nation post a current-account surplus this year.
Spain’s 10-year yield dropped 9 basis points to 4.222 percent at 11:37 a.m. in Madrid. That’s down from a euro-era record of 7.75 percent on July 25, the day before European Central Bank President Mario Draghi pledged to do “whatever it takes” to defend the euro.
“Exports have improved,” Economy Minister Luis de Guindos said this week. “They are the main driver of Spain’s recovery and of the economy’s transformation.”