Itaú BBA - CHILE – A large trade surplus in 2020, helped by terms of trade

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CHILE – A large trade surplus in 2020, helped by terms of trade

January 7, 2021

Dynamic consumption and recovering oil prices would lead to a narrower trade surpluses ahead

Despite surging consumer goods imports in December (amid the second pension withdrawal process), continued export growth led to another large trade surplus to close last year. The trade surplus was USD 1.4 billion in December, above our USD 0.8 billion expectation, but USD 100 million smaller than during the final month of 2019 (the first such case since January). As a result, the trade surplus for 2020 was USD 16.8 billion, a significant rise from the USD 4.2 billion recorded in 2019. At the margin, our own seasonal adjustment shows the trade balance surplus at USD 17.6 billion in 4Q20, a tick larger than the USD 16.7 billion in 3Q20, but below the cycle peak of USD 22.5 billion in the quarter ending in July. Going forward, consumption support measures, along with recovering oil prices would offset upbeat mining exports and lead to a narrower trade surplus this year.

Mining and agriculture sales continue to lift exports. Total exports grew 6.1% YoY in the month of December, moderating from the double-digit gains in the prior two months (as the base of comparison normalized following the passing of the peak disruption from the social unrest period). Mining shipments expanded 9.4%, while agricultural goods rose 11.4% YoY (in line with November). Meanwhile, industrial exports slumped 1.6% YoY, reflecting that the global economic recovery remains uneven. In the final quarter of the year, exports increased 10.9% YoY (0.9% up in 3Q20), amid a double-digit boost from mining and agricultural sales. At the margin, exports increased 29.0% qoq/saar (3.1% drop in 3Q20). In 2020, exports increased 2.6%, partially recovering from the 7.1% drop in 2019.

A milder energy drag and accelerating consumer goods led to 9.8% YoY imports rise in December. Imports had been shrinking at double-digit rates since February. After nearly halving in previous months, the energy imports decline moderated to 18.3% as the global oil price recovery consolidates. Meanwhile, capital goods imports dropped 3.4% (18.2% previously), the mildest contraction since November 2019 as imports of transportation equipment and mining and construction machinery returned to growth. Consumer goods imports increased 22.7% YoY (1.6% drop in November), as electronics led to durable goods imports rising by nearly 50%. Two successive initiatives that have permitted Chileans to withdraw 10% of their pension has boosted consumption dynamics in 2H20. During 4Q20, imports still shrunk 6.2% YoY (17.8% down in 3Q20). At the margin, they increased 30.5% qoq/saar, moderating from the 49.5% gain in 3Q20. During last year, total imports slumped 16.4% (6.8% down in 2019).

The significantly large trade surplus recorded in 2020 is in line with a mild current account surplus (0.3% of GDP; 3.9% deficit in 2019). For this year, the anticipated domestic economic recovery and increasing income deficit amid elevated copper prices would result in the current account returning to a deficit of around 2% of GDP.

Miguel Ricaurte
Vittorio Peretti 

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