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In a nutshell, external data in June, remains negative, Current Account recorded a small deficit, the second month in a row. In fact, Tourism is losing steam, the Travel Account surplus in June increased only 1.5% and 3.9%YtD, while the Goods account deficit is becoming more negative, in June +33%YoY/17.9%YtD and roughly 10.3% of GDP (LtM), a figure that shows a strong imbalance…

The Bank of Portugal released June’s External Balance data, yesterday (unfortunately we were not able to comment yesterday, sorry for any inconvenience).     

The main highlights are the following:

1 – Current Account Balance, in percentage of GDP, last 12 months (LTM): 0.38%. Compares with 12MMA (12 months moving average): +1.0% and 3MMA: +0.5%;

2 – Balance of Goods (just goods, net), deficit: -10.3% of GDP (LTM) vs. 12MMA: -9.9%/3MMA: -10.2%;

3 – Balance of Goods, deficit, in June, went up +32.8%YoY vs. 12MMA: +17.1%/3MMA: +18.3%;

4 – Balance of Services (just services, net; includes Travel Account Balance) surplus: +10.5% of GDP (LTM) vs. 12MMA: 10.7% and 3MMA: 10.5%;

5 – Balance of Services, Surplus, in June, +0.1%YoY vs. 12MMA: 2.7%/3MMA: +1.5%;    

4 – Travel Account Balance (just tourism revenues, net; a subcomponent of Services Account Balance) surplus is at +7.1% of GDP (LTM) vs. 12MMA: +7.2%/3MMA: +7.1%;

5 – Travel Account surplus, in June went up 1.5%YoY vs. 12MMA: +3.9%/3MMA: +4.1%.

Our comments: The Portuguese current account in June was negative, and is now €1.8Bn negative YtD, roughly 1.15% of GDP. Even that over the last 12 months (LtM), it remains slightly positive, 0.38% of GDP, the 2H of the year is usually positive, due to the summer months. The main reason is the abnormal deficit at Goods balance, 10.3% of GDP, increased 32.8% in June well above moving averages. Meanwhile, the Travel Account that has been the engine of the Portuguese economy is recently showing less power, surplus roughly stable at 7.1% of GDP, +1.5%YoY in June below moving averages and only +3.9%YtD.

Summing up, the Travel Account is losing steam, apparently there’s a general lower growth trend in Portugal and Spain in tourism, however clearly Portugal is adjusting faster, Portuguese airports traffic until June, +2.5%YtD vs. Spain: +3.7%. Meanwhile, the Portuguese Goods Account deficit above 10% in June (LtM) should be seen as a strong signal of imbalance.       

Source: INE, BoP, AS Independent Research