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Eurozone exports hit by Russian crisis

Economic crisis in Russia and sluggish demand from Turkey weighed on hopes for an export-led recovery in the eurozone in June, official data showed on Monday (Aug 18).

BRUSSELS: Economic crisis in Russia and sluggish demand from Turkey weighed on hopes for an export-led recovery in the eurozone in June, official data showed on Monday (Aug 18).

Exports from the 18-nation single currency zone dipped by 0.5 per cent in June compared with May to €162.2 billion euros (S$270 billion), the Eurostat statistics agency said. "June's eurozone trade data provided yet further evidence that the external sector remains too weak to make up for the region's feeble domestic recovery," said Jessica Hinds of Capital Economics.

Eurozone exports were dragged down by a 14 per cent slump in demand from sanction-hit Russia and an 8 per cent drop from Turkey, which is suffering an economic slowdown. With imports up a slight 0.5 per cent, this meant countries in the eurozone posted a marginally higher 16.8 billion trade surplus in June, up from 15.4 billion euros the month before. "Weaker external demand played an important part in the slowdown of the eurozone export-led recovery in the second quarter," said Christian Schulz, economist at Berenberg Bank.

Policy-makers in Brussels had hoped the eurozone economy was recovering on the back of exports from periphery countries that have pushed through reforms recommended by the EU.

But there are fears the crisis in Ukraine will weigh on growth this year and some EU leaders have warned that sanctions against Russia, which came into effect this month, could further derail the bloc's fragile recovery from the eurozone debt crisis. "Not just the crisis of Russia's economy, but also the temporary slowdown in the US and some emerging markets contributed to the spring lull," said Schulz.

Growth figures last week showed the eurozone economy ground to a halt in the second quarter, casting a cloud over the crisis-hit region. In June, powerhouse Germany was the only major eurozone economy to post a significant increase in exports for the year to date, which rose 3 per cent from the same period in 2013.

Exports in Spain and Portugal, which slumped into deep recessions during the eurozone debt crisis, dropped one percent. Greek exports were down 8 per cent. Meanwhile, demand for eurozone exports was up a strong 8 per cent in Britain, where an economic recovery is underway. Demand from China was also up 8 per cent.

"The UK was one of the few very strong bright spots for trade in the first half of the year," Berenberg's Schulz said. The recovery in Britain is in part fuelled by the demand for imports.

In June, Britain posted the widest trade deficit in the 28-nation EU, at 48.1 billion euros, followed by France, Spain and Greece. Overall, the EU posted a trade surplus of a 2.9 billion euros in June, pushed wider than the previous month by a drop in imported energy. 

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