Itaú BBA - CHILE – Trade surplus narrows in April

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CHILE – Trade surplus narrows in April

May 7, 2019

The composition of imports partly mitigates external vulnerabilities

Another trade surplus was registered in April, yet the sixth consecutive month of contractions for mining exports has led to further narrowing of the rolling 12-month balance. A USD 612 million trade surplus was registered in April (USD 770 million one year earlier), below our USD 800 million call and the USD 950 million Bloomberg market consensus. As a result, the rolling 12-month trade surplus dropped to USD 3.5 billion (USD 4.7 billion in 2018, USD 7.4 billion in 2017). Our seasonally adjusted series shows a USD 3.8 billion (annualized) trade surplus in the rolling quarter, an improvement from USD 2.4 billion in 4Q18 when low global copper prices hampered exports.

Mining exports remain a key export drag, but there is some improvement at the margin. For the month of April, total exports dropped 6.3% yoy (-4.6% in March) with all three divisions (mining, agriculture and industrial) shrinking, reflecting the weaker global economy. For the quarter ended in April, total exports contracted 7.5% yoy (-0.1% in 4Q18), as mining fell 10.2% (-6.4% in 4Q18). Mining production has been hampered by unfavorable weather early this year, so a rebound ahead is expected. At the margin, exports fell 7.5% qoq/saar, moderating from the 14.4% drop in 1Q19 (+8.4% in 4Q18), as recovering mining exports offset weak external sales of manufactured goods.

A second consecutive month of falling imports was registered in April (-4.3% yoy). Before March, imports had been on growth streak since October 2016. One positive was the return to growth of capital goods imports in April, which may suggest that the estimated moderation of investment dynamism in 1Q19 was transitory. Overall, for the quarter ended in April, total imports dropped 2.0% yoy (+13.6% in 4Q18). The weakness in the quarter was widespread with declines of consumer, capital and intermediate goods. Going forward, recovering global oil prices would likely result in the unwinding of the energy import drag. With investment expected to be the growth driver this year, capital imports are likely to be robust going forward. At the margin, imports fell 7.9% qoq/saar, a sharp moderation from the 23.6% decline in 1Q19 (+21.1% in 4Q18), as the strain from energy and capital imports fades. 

We expect the current account deficit to remain broadly stable and wide this year around 3% of GDP. Moderating growth among trade partners and the consolidation of the domestic recovery will keep the deficit wide. Nevertheless, the composition of imports (stronger capital goods relative to other categories) partly mitigates external vulnerabilities.

Miguel Ricaurte
Vittorio Peretti

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