Growth got worse as the year progressed, showing the country is being hit by the slowdown in other countries in Europe and elsewhere. With domestic demand falling, and government consumption being cut back the country is now largely dependent on exports for growth, but with the country’s largest export market, Spain, also undergoing its own austerity program this growth is getting harder to come by.
The chart above, which only shows data up to the end of September, makes plain how exports had surged following the ending of the first European recession, offsetting the negative trend in household demand.
But the latest data show that while net trade was a positive element in fourth quarter GDP, this was largely the result of a very sharp fall in imports. Year on year exports were up 5.8%, while imports fell by a whopping 13.5%. We don’t have official data from the statistics office on quarter by quarter changes in exports, but the data we do have suggests they stagnated when compared to the third, following a pattern generally seen across Europe. Despite the almost total dependence of the economy on exports now for growth, the country still runs a goods trade deficit.
And while both this and the current account deficit have improved over the last year, the rate has been painfully slow, indeed the IMF is still forecasting a CA deficit all the way through to 2016 (and presumeably beyond) with a 5% deficit in 2013 and still a 2.8% one in 2016. To put this in perspective, countries in Eastern Europe like Latvia and Hungary who have been through these corrections already now run current account surpluses, and they are still a long way from being out of the woods.