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A rising goods surplus is indicative of the domestic demand slowdown that is underway

During 4Q22, the current account deficit surprised to the upside as the services and income deficits remained wide. A USD 5.0 billion current account deficit was recorded during the final quarter of 2022, above the Bloomberg market consensus of USD 2.7 billion and our USD 3.0 billion call. Nevertheless, the deficit narrowed from the USD 8.3 billion in 4Q21. A large income deficit persisted given profitability of foreign investments in Chile. Meanwhile, despite lower global shipping fees, the services trade deficit remained near historical highs. Hence the CAD narrowing in 4Q22 was due to a rising trade surplus of goods as domestic demand gradually cools and manufacturing and lithium exports solidify. The rolling-4Q current account balance reached 9.0% of GDP, down from 10% as of September, while 1.5pp higher than in 2021. At the margin, the deficit fell to 7.4% of GDP (SA, annualized; from 8.9% in 3Q). 



A rising goods surplus is indicative of the domestic demand slowdown that is underway. A moderating upside pull from global oil prices (fuel prices rose 12% yoy in 4Q; 44% in 3Q), and a deepening fall in consumer goods volumes (-30% yoy in 4Q vs -12% in 3Q22), along with a milder overall mining export drag aided a goods trade surplus of USD 3.7 billion (USD 1.4 billion surplus in 4Q21). Nevertheless, the trade surplus of goods during 2022 came in at only USD 3.8 billion (USD 10.5 billion in 2021). A large services deficit of USD 3.7 billion persisted in 4Q, driven by shipping fees, tourism and financial services. The income deficit came in at USD 5.1 billion, up from USD 4.4 billion in 4Q21.


The bulk of the CAD in 4Q22 was financed through net portfolio inflows and to a lesser extent FDI. The direct investment component reached a USD 2.0 billion net inflow in 4Q22, up from a USD 5.7 billion outflow one year earlier, given the reinvestment of profits and capital injections in the non-financial sector. Over the rolling-4Q, net direct investment reached USD 8.1 billion (USD 2.0 billion in 2021). After two prior quarter of net outflows, portfolio investment registered a large net inflow in 4Q (USD 6.4 billion; likely boosted by the restructuring of a major airline). Net portfolio investment during 2022 stood at an inflow of USD 8.4 billion (USD 33.8 billion in 2021). Reserves declined USD 9.2 billion during the year (USD 12.2 billion increase in 2021), following the intervention in the FX market. 


During last year, residents (including public sector) have invested a total of USD 27 billion abroad (including USD 13 billion through direct investment, USD 6 billion as portfolio investment, and USD 8.2 billion as other investment). Foreigners invested USD 44 billion in Chile (USD 21 billion through FDI, USD 14 billion through portfolio investment and USD 8.5 billion as other investment). The stock of external debt decreased between 4Q21 (USD 238 billion; 84.1% of GDP) and 4Q22 (USD 233 billion; 76.4%).



Looking to 2023, the expectation that global transportation fees continue to normalize, along with the correcting domestic demand and still high copper prices would aid a narrowing of the CAD to around 4%. 


Andrés Pérez M.

Vittorio Peretti 

Ignacio Martinez Labra