Itaú BBA - COLOMBIA – Large trade deficit in May, despite weakening imports

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COLOMBIA – Large trade deficit in May, despite weakening imports

julio 19, 2019

Moderating global demand and low oil prices would keep the CAD wide

A larger-than-expected trade deficit was recorded in May as weaker oil exports was only partially offset by slowing imports. The USD 817 million trade deficit came in above the Bloomberg’s market consensus of USD 716 million (also our call) and wider than the USD 600 million deficit registered in May last year. The rolling 12-month trade deficit increased from USD 8.2 billion as of March (USD 7.0 billion in 2018) to USD 8.6 billion, the highest since mid-2017. The rise is a result of a gradual moderation of the energy trade surplus since the end of 2018, while the non-energy trade deficit also edges up. Meanwhile, our own seasonal adjustment shows the trade deficit remained stable at a wider USD 9.6 billion (annualized) in the quarter.

Imports grew at its slowest pace since April 2018, despite a continuing boost (likely to fade ahead) from imports of transportation equipment (linked to renewal of bus fleets in Bogota). Total import (FOB) growth reached 6.1% yoy in May (7.1% previously). In the quarter ending in May, imports moderated to 7.6% (9.4% in 1Q19; 11.3% in 2018). Imports excluding both energy imports and transportation equipment showed a slowdown to 0.8% in the quarter (7.4% in 1Q19 and 12.4% in 2018), reflecting weakening domestic demand. At the margin, we estimate that imports accelerated to 15.7% qoq/saar (4.3% drop in 1Q19), but excluding fuel and transportation equipment imports are far less impressive (from -1.8% qoq/ssar in 1Q19 to 3.0%).

Export growth slowed in May as oil exports were hampered by slower volume growth and falling prices. Total exports increased 1.2% year over year in May (2.0% in April; 10.2% in 2018), in part reflecting the effects of weakening global growth. Oil exports contracted 2.0% (+21.8% in April; 26.6% in 2018), while coffee exports dropped 26.4%, the sharpest decline since July 2018. In the quarter ending in May, exports expanded a mild 0.9% (1.3% decline in 1Q19). However, oil exports did better sequentially so exports increased 29.3% qoq/saar.  

With moderating global demand and low oil prices, we expect the current-account deficit to remain wide at 4.3% of GDP this year (3.9% last year). 

Miguel Ricaurte
Carolina Monzón

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