Spain Current-Account Surplus Grows on Investment Inflows
(Corrects to distinguish surplus growth from investment increase in headline and first paragraph. See TOP CRIS for more on Europe’s debt crisis.)
The November surplus amounted to 1.8 billion euros ($2.44 billion), compared with 865 million euros in October and a deficit of 3.9 billion euros the same month a year earlier, the Bank of Spain said. That narrowed the shortfall for the first 11 months of 2012 to 13.1 billion euros from 33.6 billion euros in 2011.
Spain is trying to rebalance its economy by reducing labor costs after running the world’s second-biggest current-account deficit during a debt-fueled housing boom that ended in 2008. Exports and tourist visits are the only drivers of growth left as a 26 percent jobless rate and five austerity rounds in less than a year undermine domestic spending.
“Non-domestic investors are returning to the Spanish bond markets and probably to equity markets as well,” said Ricardo Santos, euro-area economist at BNP Paribas SA in London. “It’s not only hot money reflecting a more positive mood, there is also real direct investment as it would seem that structural reforms are starting to convince investors.”
In November, Spain registered the biggest foreign portfolio-investment inflow since March 2007 at 19.1 billion euros while direct investment was 1.8 billion euros, the Bank of Spain said.
As Spanish bonds and stocks have rallied since July, when the European Central Bank pledged to do whatever was needed to hold the euro together, foreign investors increased their sovereign debt holdings. The yield on Spain’s 10-year benchmark bond rose two basis points at 11 a.m. in Madrid to 5.25 percent. That compares to a euro-era high of 7.75 percent in July. The spread with similar German maturities was at 357 basis points.
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