Itaú BBA - COLOMBIA – Trade deficit widened further in February

Macro Latam

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COLOMBIA – Trade deficit widened further in February

abril 22, 2019

Still weak energy exports is offsetting the moderation in imports.

Despite a lower-than-expected trade balance deficit in February, external imbalances continued to deteriorate. The USD 581 million deficit, which came below the Bloomberg median estimate (USD -716 million) and our forecast (USD -683 million), was wider than the USD 489 million deficit recorded one year ago. The corresponding 12-month rolling trade deficit continues to widen from the USD 7.1 billion recorded in 2018, to USD 7.8 billion at the end of February. Additionally, our own seasonal adjustment shows the deficit was wider in the quarter ending in February, at USD 10.5 billion annualized (9.9 billion in 4Q18), as weak oil energy exports offset the moderation in import growth.

Imports growth is moderating. Total imports (FOB) gained 8.2% from last year, after expanding 10.4% in January, the slowest pace since April last year. Growth was led by broadly stable capital goods imports (+10.4% YoY). Intermediated goods imports growth moderated (7.3%), while consumer goods imports improved mildly (7.3%). Consequently, imports growth decelerated to 11.2% YoY in the quarter ending in February, from 19.4% in 4Q18, amid a generalized slowdown in spite of double digit growth in capital and intermediate goods imports. At the margin, shrinking consumer and capital goods led imports to contract 1.3% qoq/saar, a sharp slowdown from the 30.6% gain in 4Q18.

Exports improved in February as the drag from oil exports moderated. Total exports grew 6.2% yoy in February, up from the 7.8% drop in January. Coal exports expanded 13.6% (-31.9% previously), the highest growth rate in four months, while coffee exports accelerated to double-digit growth. Meanwhile, oil exports recovered to 5.8% (-10.0% previously) as export volumes increased compared to last year and prices moderated their decline. However, in the quarter ending in February exports still fell 6.3% (versus +1.6% 4Q18), dragged down by lower oil prices at the turn of the year and disappointing coal exports. At the margin, total exports contracted 26.3% qoq/saar (-12.0% in 4Q18 and -0.4% in 3Q18).

The weakening global economy and the gradual activity recovery have hampered the outlook for external accounts. We see the 2019 current account deficit at 4.0% of GDP (3.8% in 2018). With internal demand improving and a broadly stable real exchange rate, a meaningful correction of the deficit is unlikely.

Miguel Ricaurte
Carolina Monzón

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