Itaú BBA - COLOMBIA – Trade deficit widens at the margin

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COLOMBIA – Trade deficit widens at the margin

August 14, 2017

We forecast a current-account deficit of 3.7% of GDP this year (4.3% in 2016).

The trade deficit in June came in at USD 832 million, broadly in line with the Bloomberg market consensus and slightly smaller than our USD 922 million forecast. The deficit is larger than the USD 771 million deficit recorded one year ago, while a deficit of USD 2.2 billion was recorded in 2Q17 (from USD 2.5 billion in 2Q16). As a result, the rolling 12-month trade deficit narrowed to USD 9.7 billion, from the USD 10.0 billion as of 1Q17 (USD 11.5 billion in 2016; USD 15.6 billion in 2015). The narrowing is due to a growing energy balance, while the non-energy balance deficit is broadly stable. However, at the margin exports are deteriorating mostly due to lower oil prices. Hence, the three-month trade deficit came in at USD 11.9 billion (seasonally-adjusted and annualized), from USD 9.1 billion in 1Q17 (USD 7.8 billion in 4Q16).

Capital goods lifted imports in the quarter imports, while imports of consumption goods fell. Imports (FOB) increased 5.1% year over year in 2Q17, slowing from the 7.0% rise in 1Q17. In the quarter, capital goods imports expanded 11.7% (6.4% in 1Q17), driven by transportation equipment. Intermediate goods rose 5.3% (6.8% in 1Q17). On the other hand, consumer goods imports contracted 3.1% (+7.6% in 1Q17), with both the durable and non-durable components shrinking. At the margin, we estimate that imports decreased 1.3% qoq/saar (+32% in 1Q17 and +13% in 4Q16), dragged down by the consumption division. 

Export growth slowed in the second quarter of the year as commodity price gains moderate and volumes decline. Total exports rose 10.6% year over year in 2Q17, a slowdown from the 32.4% in 1Q17. Volatile coal exports continued to lift exports in the quarter with growth of 35.7% (82.7%). Meanwhile, oil exports grew a mild 6.9% (47.7% previously in 1Q17) as quantities dropped 13.0% year over year (-18.4% in 1Q17) and price gains slowed significantly to 23.7% from 79.6% in 1Q17. On the other hand, exports excluding Colombia’s traditional goods (coal, coffee, oil and ferronickel) improved to 9.2% (8.8% in 1Q17). At the margin, exports fell 28.1% qoq/saar from +21% qoq/saar in 1Q17 as oil and coal exports turned negative.

We forecast a current-account deficit of 3.7% of GDP this year (4.3% in 2016). The low oil price limits the current-account-deficit correction, in spite of weakening internal demand.


Miguel Ricaurte

Vittorio Peretti


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