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In a nutshell, external data in May, was negative, Current Account recorded a small deficit, mainly due to the Primary Income that is usually strongly negative in May (dividends to be paid). In fact, over the last 12monts, the Current Account balance remains positive, roughly 0.93% of GDP, nevertheless, the underlying trend is not positive, as Services Account surplus is coming down, while Travel Account surplus (sub-component of Services Account) is growing below mid-single digit…    

The Bank of Portugal has just released May’s External Balance data.     

The main highlights are the following:

1 – Current Account Balance, in percentage of GDP, last 12 months (LTM): 0.93%. Compares with 12MMA (12 months moving average): +1.1% and 3MMA: +1.0%;

2 – Balance of Goods (just goods, net), deficit: -9.7% of GDP (LTM) vs. 12MMA: -9.7%/3MMA: -9.7%;

3 – Balance of Goods, deficit, in May, went up +4.7%YoY vs. 12MMA: +10.3%/3MMA: +5.0%;

4 – Balance of Services (just services, net; includes Travel Account Balance) surplus: +10.5% of GDP (LTM) vs. 12MMA: 10.8% and 3MMA: 10.5%;

5 – Balance of Services, Surplus, in May, -4.2%YoY vs. 12MMA: 0.4%/3MMA: -1.9%;    

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 May went up 4.7%YoY vs. 12MMA: +4.2%/3MMA: +6.0%.

Our comments: The Portuguese current account in May was negative, mainly due to the Primary Income, usually strongly negative in May, due to dividends to be paid to non-residents. Nevertheless, surplus at Balance of Services is under pressure, in May, -4.2%YoY and roughly 10.5% of GDP (LTM), below 12MMA. Travel, a subcomponent of Balance of Services, the surplus remains positive, but flat at 7.1% of GDP (LTM), and grew only 4.7%YoY in May, consolidating below mid-single digit (June should also underperform, as traffic at Portuguese airports went down -0.2%YoY; the general strike partially explains the airports poor performance).

All in all, the Current Account is still positive, +0.93% of GDP (LTM). However, Services account surplus is under pressure and the Travel surplus, a sub-component of Services Account, is growing below mid-single digit, fortunately the deficit at Balance of Goods is not deteriorating, consolidating below 10% of GDP.                   

Source: INE, BoP, AS Independent Research