Itaú BBA - CHILE – Trade improvement in 2017

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CHILE – Trade improvement in 2017

January 8, 2018

Annual mining exports growth remains robust while it has moderated at the margin as output consolidates.

Annual mining exports growth remains robust while it has moderated at the margin as output consolidates. In December, the trade balance recorded a USD 1.1 billion surplus, in line with our forecast, while above the Bloomberg market expectation of USD 875 million. So in 2017, Chile recorded a USD 6.9 billion trade surplus (USD 5.3 billion in 2016), the highest annual trade surplus since 2011 (USD 10.8 billion). Our seasonally adjusted series shows that, at the margin, the trade balance surplus dipped to USD 9.6 billion (annualized) in the final quarter of the year (USD 12.8 billion in 3Q17), partly due to a widening of the energy deficit.

Agriculture exports in 4Q17 dropped 24.5% year over year, down from +17.9% in 3Q17, while mining exports stayed elevated at 26.7% (26.6% in 3Q17). Industrial exports grew 6.8% in the quarter (10.4% in 3Q17). At the margin, exports growth decelerated to 3.4% qoq/saar, from 55.6% in 3Q17 as mining export growth normalizes following the recovery from the 1H17 production strike. Going forward, the recent rise in prices could partly offset the quantum stabilization. Overall, in 2017, total exports grew 12.7%, improving from the 2.6% drop in 2016, led by mining (+20.4% vs. -4.9% in 2016).

Import growth remains elevated, boosted by broadly stable consumer goods imports along with improving intermediate imports (due mainly to higher fuel prices). In the final quarter of the 2017, imports increased 11.9% year over year, from 7.0% in 3Q17. Energy import growth increased to 25.6% (7.9% in 3Q17), while consumer goods grew 14.0% (15.9% in 3Q17). Capital goods imports slowed to 3.8% (8.0% in 3Q17) following a moderation of transportation items. On a positive note, imports of machinery continued to grow (6.2% vs. 5.7% in 3Q17). At the margin, imports grew 27.9% qoq/saar, improving from -2.8% in 3Q17, mainly explained by the energy component on the back of higher oil prices along with an uptick in consumer goods imports. In 2017, total imports grew 10.9%, improving from the 5.8% drop in 2016, led by consumption (+18.1% vs. -1.2% in 2016) and energy i mports (+25.5% vs. -14.1% in 2016).

The latest trade figures highlight Chile’s limited external vulnerabilities. With copper prices set to remain elevated for most of 2018, we expect the current account deficit to stay at low levels, close to the 1.5% estimated for 2017.

 

Miguel Ricaurte
Vittorio Peretti



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