Encyclopedia of Contemporary Spanish Culture

By Eamonn Rodgers; Valerie Rodgers | Go to book overview

B

balance of payments

Spain’s balance of payments shows the usual cycle of oscillations between surplus years and deficit years. From the early 1960s to the early 1970s there was generally a surplus. But Spain’s dependence on imported oil changed the situation drastically, following OPEC’s quadrupling of the commodity price in 1973. Corrective action was not taken promptly by the Spanish authorities, and the ensuing current account deficit was not corrected until the peseta was devalued in 1977. The immediate improvement was short-lived, as OPEC imposed another price increase. The higher import bill at a time of exporting difficulties because of competition from newly industrialized countries caused deficits between 1980 and 1983, but the improving international situation and the increasing numbers of incoming tourists brought the account back into surplus between 1984 and 1987. Since then, trade relations and policy have been governed by Spain’s position in the EU. Although Spain has exported much more to the EU since it joined, its import bill, encouraged by the liberalization of trade, has grown even more. Furthermore, a strong peseta policy (required by the ERM and the need to curb inflation), favoured importers over exporters. The result was a continuing current account deficit from 1988 onwards, which peaked in 1992. The turnaround did not come until 1995 after four re-alignments of the currency from 1992 to 1994.

Spain’s deficit in merchandise trade can be made up by the surplus in services, essentially tourism. At between one-fifth and one-sixth of total income from visible and invisible exports, tourism is a major component of Spain’s balance of payments: a buoyant tourist sector in 1995 and 1996 helped to bring the account back into the black. When earnings from tourism are insufficient to offset the deficit in visible trade, the gap has to be financed from the country’s foreign currency reserves, from loans, or via inward foreign investment. The scale of foreign investment means that the balance on capital account consistently shows net inflows, so that despite the repeated current account deficits from 1988 to 1994 Spain’s foreign currency reserves were on a rising trend. The only hiccup occurred in 1992 to 1993, when the turmoil in currency markets caused severe ERM instability of which the peseta was a major victim, the loss of confidence and three successive devaluations leading to serious capital outflows and a decline in reserves. Nevertheless by 1996 the upward trend in reserves had been re-established. With an import—export ratio in the region of 75 to 80 percent Spain is very unlikely in the foreseeable future to be able to finance its imports solely from its merchandise exports. As long as tourism remains a major earner, however, the balance of payments should never slip too damagingly into the red.

See also: economy; foreign trade; inflation; national debt


Further reading

o
Organization for Economic Co-operation and Development (yearly or biennial) OECD Economic Surveys: Spain, Paris: OECD Secretariat (a

-44-

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Encyclopedia of Contemporary Spanish Culture
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Introduction x
  • Acknowledgments xii
  • Structure xiii
  • Architecture xiv
  • A 1
  • Further Reading 7
  • Further Reading 11
  • Further Reading 29
  • Further Reading 37
  • Further Reading 41
  • B 44
  • Further Reading 47
  • Further Reading 65
  • C 70
  • Further Reading 81
  • Further Reading 93
  • Further Reading 100
  • Further Reading 113
  • Further Reading 128
  • D 135
  • Further Reading 136
  • Further Reading 140
  • E 152
  • Further Reading 155
  • Further Reading 166
  • Further Reading 171
  • F 173
  • Further Reading 185
  • Further Reading 206
  • G 213
  • Further Reading 227
  • Further Reading 229
  • Further Reading 231
  • Further Reading 242
  • H 245
  • I 261
  • Further Reading 266
  • J 276
  • Further Reading 280
  • K 283
  • L 285
  • Further Reading 292
  • M 313
  • Further Reading 332
  • Further Reading 335
  • N 359
  • Further Reading 362
  • Further Reading 365
  • O 376
  • P 384
  • Further Reading 429
  • Q 430
  • R 433
  • Further Reading 435
  • Further Reading 436
  • Further Reading 439
  • Further Reading 443
  • References 452
  • S 464
  • Further Reading 471
  • Further Reading 475
  • T 502
  • Further Reading 508
  • Further Reading 509
  • U 526
  • Further Reading 536
  • V 537
  • Further Reading 538
  • Further Reading 539
  • Further Reading 544
  • W 545
  • X 550
  • Y 552
  • Further Reading 553
  • Z 554
  • Index 557
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