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Falling imports signal downbeat internal demand.
2023/12/20 | Andrés Pérez M., Vittorio Peretti, Carolina Monzón & Juan Robayo.

The trade deficit in October came in at USD 1.0 billion, narrowing by USD 0.5 billion over one year. The deficit was in line with our call, but above the Bloomberg market consensus of USD 0.7 billion. Total imports (FOB) contracted 10.1% yoy (23.9% decline in September) dragged by agricultural and manufactured goods, while exports contracted 1.5% yoy in October (-13.6% in September). As a result, the rolling 12-month trade deficit reached USD 10.5 billion, 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 a lower USD 8.5 billion (annualized), down from the USD 9 billion recorded in 3Q23 (USD 10.5 billion in 2Q23).

Imports continued to fall sequentially in October, signaling downbeat internal demand. Total imports (FOB) contracted 10.1% yoy in October (-23.9% in September), dragged by construction materials (-32.9% yoy), capital goods for agriculture (-28.1% yoy), intermediate goods for industry (-23.3% yoy) and transportation equipment (-15.9% yoy). In the quarter ending October, imports contracted 20.4% yoy (-25.5% in 3Q23 and -19.5% in 2Q23).  Imports excluding fuels and transportation equipment fell 22.3% yoy (25.6% contraction in 3Q23; -20.3% in 2Q23). At the margin, we estimate that imports fell 15.1% qoq/saar (-21.3% in 3Q23, -16.8% in 2Q23)


Coal continues to drag exports in October. Exports fell 1.5% yoy in October (-13.6% in September). Oil exports increased 28.3% yoy (+9.5% in September), boosted by volumes. On the other hand, coal exports continued to fall sharply (-36.9% yoy; -47.2% in September), mainly due to a decline in prices.  Exports excluding traditional goods (oil, coal, coffee and ferronickel), accounting for 42.9% of total exports increased 6.2%. In the quarter ending in October, exports contracted 25.7% yoy (from 25.5% yoy drop in 3Q; -19.5% in 2Q), dragged by double-digit declines in ferronickel, coal and coffee exports. At the margin, exports contracted 4.0% qoq/saar (-8.8% in 3Q23; -9.7 in 1Q23). 

A significant adjustment of domestic demand will support a swift narrowing of the current-account deficit. We expect the CAD to narrow to 2.7% of GDP this year, down from the 6.2% in 2022.