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Contractionary monetary policy supporting BoP adjustment.
2023/11/07 | Andrés Pérez M., Vittorio Peretti & Ignacio Martinez Labra

A trade surplus of USD 946 million was registered in October, similar to the Bloomberg market consensus of 954 million and our USD 1.0 billion call, as overall imports remain weak following a prolonged period of contractionary monetary policy. The surplus in October was broadly in line with the print one year ago. Total exports fell by 4.3% YoY (-6.5% drop in September), with copper exports falling 8.8% YoY (+6.6% in September), while lithium dropped by a milder 11.3% YoY (-54% previously). Manufacturing exports posted growth of 4.4% YoY, boosted by chemicals and beverages. Meanwhile, total imports contracted by a milder 2.8% YoY (from double-digit rates previously) as rising nominal energy imports (+13.1% YoY) offset the still double-digit declines for both consumer and capital goods, reflecting the continued adjustment of domestic demand amid tight financial conditions.  


During the rolling-quarter, the annual decline of total exports eased mainly due to a milder manufacturing drag. Exports contracted 3.4% in the quarter (-4.5% in 3Q23; 6% down in 2Q). Total mining dropped 2.5% (in line with 3Q; 6.5% fall in 2Q) as the lithium drag remained notable (contracting 35%). Manufacturing exports fell 4.5% (-7.7% in 3Q and 5.1% drop in 2Q). Sequentially, exports increased 11.9% qoq/saar.


The consumer and capital import drag remains significant. Imports contracted 14.4% during the quarter (-18.5% in 3Q; 20.2% drop in 2Q23). Consumer goods imports fell 16.6% (only slightly more moderate than the 19.6% drop in 3Q). Meanwhile, capital goods imports contracted 15.8% (-12.7% Iin 3Q), dragged by transportation related vehicles. Mining and construction machinery imports are posting mild growth, but not significant enough to suggest a meaningful investment recovery. At the margin, imports fell 2.2% qoq/saar (-12% in 2Q23), given the increased pull from energy imports.


We expect a CAD of 3.6% of GDP for this year (from 9.0% last year), and 3.8% next year amid only a weak domestic demand recovery. Overall, the 12-month rolling trade surplus sits at an elevated USD 17.1 billion, from USD 13.7 billion as of June and USD 3.8 billion in 2022. The domestic demand adjustment and normalization of the service and income deficits are supporting the external imbalance correction.