Itaú BBA - CHILE – A large trade surplus to end 2018

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CHILE – A large trade surplus to end 2018

January 7, 2019

As global demand softens, we expect the current account deficit to keep widening this year

Plummeting global oil prices in 4Q18 aided a large trade surplus last year, albeit still a moderation from 2017. Additionally, consumption related imports weakened in the final quarter of the year, offsetting falling mining exports. Overall, a trade surplus of USD 596 million was posted in December (Itaú: USD 675 million), leading to a surplus of USD 713 million in 4Q18 and a USD 5.4 billion surplus in 2018 (Itaú: USD 5.5 billion; USD 7.9 billion in 2017). Our seasonally adjusted series shows a smaller USD 3.8 billion (annualized) trade surplus in 4Q18, moderating from USD 5.0 billion in 3Q18, as non-energy and capital imports accelerated at the margin.

In 4Q18, total exports shrunk 0.8% year over year, weakening from the 0.4% rise in 3Q18, as mining exports dropped 9.9% (-4.8% in 3Q18). Improving industrial exports (13.8% yoy vs. 9.4% in 3Q18) and agriculture exports (9.5% vs. -6.1% in 3Q18) could not fully offset the mining decline. At the margin, exports did show some improvement, accelerating to 2.9% qoq/saar, following a 10.5% drop in 3Q18, boosted by industrial exports and some moderation of the mining decline.

Imports slowed to 10.9% in the final quarter of 2018 (14.6% in 3Q18 and 16.2% in 1H18), on the back of tumbling oil prices. Energy imports grew 18.3%, far below the 42.5% gain in 3Q18 and 48.7% rise in 2Q18. Consumption imports grew 1.9% in the quarter (8.3% previously) as the durable component slows in line with weakening new car sales and the recent deterioration in consumer confidence. Meanwhile, capital imports remain robust (15.2% vs. 13.7% in 3Q18), consistent with recovering investment. At the margin, import growth was 10.7% qoq/saar, an improvement from the 16.1% drop in 3Q18.

As global demand softens – negatively affecting copper prices – we expect the current account deficit to keep widening this year, albeit contained given low oil prices. We expect a deficit of 2.6% of GDP for 2018, compared with the 1.5% deficit for 2017, with some widening to 2.7% this year.

Miguel Ricaurte
Vittorio Peretti

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