MercoPress. South Atlantic News Agency

Money timidly returning to Spain after 14 months of sustained outflows

Some good news for President Rajoy

Foreign investors put more money into Spain in October than they took out, marking the second month running the country has benefited from an influx of capital. Spain registered capital inflow of 12.1 billion Euros in October, the Bank of Spain said on Friday. The figure, which excludes central bank operations, was lower than the 31 billion Euros of inflow in September.

The figures are more evidence of the success of European Central Bank President Mario Draghi’s bond-buying plan for struggling euro zone governments, announced in September, in alleviating investor concerns about Spain.

“It’s a bit premature to cheer. This confirms that ever since Draghi said he would do whatever it takes to save the euro, the capital flight has stopped and partially reversed,” said Martin van Vliet, senior economist at ING.

“It’s a positive development...but Spain is not out of the woods yet and the situation can change overnight”.

Before September’s inflows, Spain had registered 14 consecutive months of outflows. The Bank of Spain also said the country’s current account registered a surplus of 0.9 billion Euros in October, compared to a deficit of 0.3 billion Euros in September.

The Bank partly attributed the surplus to the reduction of Spain’s trade deficit. The deficit stood at 955 million Euros in October, compared to 3 billion Euros a year earlier as exports have increased and imports fallen in an economic crisis.

Spain is currently suffering its second recession in three years. The government of President Mariano Rajoy has implemented harsh austerity measures to trim the country’s deficit and meet European Union-agreed targets.

Data last Friday showed retail sales fell 7.8% year-on-year in November as cash-strapped consumers rein in spending in an uncertain environment where one in four of the workforce is jobless. Spain’s economy is not expected to grow until 2014.

Spain’s budget deficit was close to 5.3% of GDP at the end of September, based on data issued by the Spanish Treasury last Friday. The Treasury put the deficit of government and regional agencies at 55.4 billion Euros. Its target for the full year is 6.3% of GDP.