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UPDATE 1-Spain current account deficit falls vs yr ago

Published 11/30/2009, 04:41 AM
Updated 11/30/2009, 04:45 AM

* Current account deficit 4.4 bln euros in Sep, vs 8.1 bln year ago

* Imports falling as Spaniards cut spending

(Adds details, explanation)

MADRID, Nov 30 (Reuters) - Spain's current account deficit fell to 4.4 billion euros ($6.57 billion) in September, down by almost half from the 8.1 billion euro shortfall in the same month last year, the Bank of Spain said on Monday.

The smaller deficit was partly due to a declining trade deficit, thanks to a 21.3 percent fall in imports as Spaniards were forced by disappearing credit to restrict their consumption, the bank's data showed.

But Spain's surplus in services fell in September compared to a year earlier, due to a fall in the surplus from tourism to 2.9 billion euros from 3.15 billion euros in September 2008.

Spain's tourist industry has been hit by declining visits from recession-hit European partners, especially Britain, where the effect has been intensified by the fall in the value of the pound against the euro.

In the first nine months of the year, the current account deficit stood at 33.8 billion euros, down from 69.5 billion euros in the same period of 2008.

Towards the end of a decade-long boom, Spain's current account deficit approached an annual 100 billion euros or 10 percent of gross domestic product. It was made possible in large part by foreign institutional investors, many of them in Germany, buying bonds issued by Spanish banks, which then used the funds to provide credit to fuel a property and consumption boom.

With this source of debt now dried up, Spain is being forced to bring its spending closer to its income, a major reason for the current steep contraction in both GDP and retail sales. (Reporting by Jason Webb; editing by Chris Pizzey) ((jason.webb@thomsonreuters.com; +34 91 585 83 28; Reuters Messaging: jason.webb.reuters.com@reuters.net))

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