MADRID, Feb 24 (Reuters) - Spain's trade deficit fell 29.5 percent in December to 6.93 billion euros ($8.83 billion) as imports tumbled during what is expected to be the country's worst recession in 50 years, government data showed on Tuesday.
Imports fell by 16.5 percent from December 2007, while exports fell by 7.4 percent, the Industry Ministry said.
The steep fall in Spain's trade deficit has reduced trade's negative contribution to gross domestic product, which means that GDP, which fell by 1 percent in quarterly terms in the fourth quarter of 2008, is not contracting as fast as indicators of domestic demand, such as retail sales, would imply.
But the trade figures confirmed the steep fall in demand by Spaniards for imported goods, with automotive imports slumping by 42 percent and imports of capital goods -- a leading indicator of future demand -- retreating by 18 percent.
A big contribution to the smaller deficit also came from lower oil prices, which helped to slash energy imports by 19 percent. There was a chink of light from imports of manufactured consumer goods, which rose by 7.5 percent.
During all of 2008, Spain's trade deficit fell by 4.9 percent to 99.1 billion euros, the first annual fall since 2002. Exports rose by 3.7 percent and imports increased by 0.6 percent, with strong growth in trade at the beginning of the year almost cancelled out by the decline in more recent months.
Spain's trade deficit was the prime contributor to a deficit in the current account -- a broader measure of a nation's transactions with the world -- which was running at about 10 percent of GDP. This was funded by credit from abroad, contributing to the large accumulation of private sector debt which is now weighing heavily on Spain in recession.
(Reporting by Jason Webb)