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Weaker imports supported the trade deficit narrowing advance in 2023.
2024/02/14 | Andrés Pérez M., Vittorio Peretti, Carolina Monzón & Juan Robayo

Weaker imports supported the trade deficit narrowing advance in 2023. The trade deficit in December came in at USD 0.5 billion, USD 0.2 billion smaller over one year. The trade deficit was in line with the Bloomberg market consensus (Itaú: USD 0.7 billion). Total imports (FOB) contracted 8.1% yoy (12.8% decline in November) dragged mainly by capital goods (-24.3% yoy; particularly related to manufacturing and construction). Exports contracted 4.2% yoy in December (-9.0% in November), hampered by coal exports. As a result, the trade deficit reached USD 9.9 billion in 2023, narrowing from the USD 14.5 billion deficit recorded in 2022 (USD 15.3 billion in 2021). At the margin, our seasonal adjustment shows the trade deficit at USD 8.3 billion (annualized), down from the USD 8.9 billion recorded in 3Q23.


Imports contracted at a double-digit rate in December, with the drag from capital goods persisting and indicative of the weak investment dynamics seen to date. Total imports (FOB) contracted 10.2% yoy in December, dragged by transport equipment (-38.2%), construction materials (-38%). Imports of consumer goods fell by a milder 1.2% (4.7% down November), reflective of the resilience of private consumption despite high inflation and interest rate. In the quarter ending in November, imports contracted 10.4% yoy (-25.5% in 3Q23). Imports excluding fuels and transportation equipment fell 12.5% yoy (25.6% contraction in 3Q23). For the full year, imports were down 16.8% (+26.1% in 2022). At the margin, we estimate that imports increased by 12.3% qoq/saar (-20.4% in 3Q23)


Exports continued to contract at the close of 2023. The 4.4% drop in exports came despite oil exports increasing 10.5% yoy (-19.5% in November; mainly due to higher volumes). Coal exports continued to fall (-28.1% yoy; -24.3% in November), mainly due to a decline in prices. Exports excluding traditional goods (oil, coal, coffee and ferronickel), accounting for 41.5% of total exports, increased 3.2%. During 4Q23, exports contracted 5.0% yoy (19.1% yoy drop in 3Q), dragged by a double-digit coal, ferronickel and coffee decline. For the full year, exports contracted 13% (+38% in 2022).  At the margin, exports expanded 20.2% qoq/saar (rebounding from a double-digit fall in 3Q23). 

Weakening domestic demand will support a significant current account deficit in 2023 to correction to 2.7% of GDP in 2023 (from 6.2% in 2022). For this year, we expect a CAD deficit of 3.1% of GDP.