Itaú BBA - COLOMBIA – Wider current account deficit in 1Q19

Macro Latam

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COLOMBIA – Wider current account deficit in 1Q19

junio 5, 2019

Amid a challenging global scenario and terms-of-trade that would likely deteriorate, the current account deficit would remain wide this year.

Higher internal demand growth and low oil prices led to a rising current account deficit in 1Q19. The USD 3.6 billion deficit in 1Q19 (4.6% of GDP) came in above our expectation (USD 3.3 billion) and was USD 808 million larger than in 1Q18 (3.5% of GDP). The resulting rolling-4Q deficit increased to 4.3% of GDP (compared to 3.9% in 2019 and 3.3% in 2017), the highest level since 2016. At the margin, our own seasonal adjustment shows the deficit narrowed, also to 4.3% of GDP in 1Q19 from 5.1% in 4Q18.


In the quarter, rising transfers and a narrower income deficit could not offset the widening of the trade deficit for goods and services. Compared to 1Q18, the income deficit was USD 0.3 billion smaller as the repatriation of profits by foreign entities with operations in Colombia decreased (particularly in the financial sector and utilities). Meanwhile, the trade deficit for goods was USD 1.2 billion larger over as exports slowed while imports growth remained near a double-digit rate.

Foreign direct investment into Colombia improved in 1Q19 (up USD 1.4 billion to USD 3.3 billion), while net direct investment stood at USD 2.6 billion (up from USD 0.9 billion one year earlier). As a result the four-quarter rolling net direct investment improved (to USD 8.0 billion, from USD 6.2 billion), but has not been enough to fully fund the wide current account deficit. Around half of the foreign direct investment flew to the mining sector. Meanwhile, an inflow of foreign portfolio investment was registered in the quarter (following an outflow in 4Q18), but net portfolio inflows remain weak (at USD 1.8 billion over four quarters). 

As the global scenario becomes more challenging and the terms-of-trade likely deteriorate, the current account deficit is likely to remain wide this year. We see risks of a wider deficit than our current 4.1% of GDP expected for 2019.


Miguel Ricaurte
Carolina Monzón

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