The trade deficit in July came in at USD 0.6 billion, increasing by USD 0.1 billion over one year. The deficit was somewhat above both the Bloomberg market consensus of USD 0.5 billion and our USD 0.3 billion call. Total imports (FOB) contracted 26.7% yoy (19.2% decline in June) dragged by intermediate and agricultural goods, fuels, capital and consumption goods, while exports contracted 30.8% yoy in July (-26.9% fall in June). As a result, the rolling 12-month trade deficit reached USD 13.2 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 USD 10.5 billion (annualized), narrowing from USD 10.3 billion recorded in 2Q23 (USD 12.1 billion in 1Q23).
Imports remain weak as the domestic demand adjustment continues. Total imports (FOB) contracted 26.7% yoy in July (19.2% down in June), dragged by intermediate goods for agriculture (-49.9% yoy), fuels (-43.1% yoy), and construction materials (-34.1% yoy). In the quarter ending in July, imports contracted 21.5% yoy (-19.5% in 2Q23 and +10.4% in 1Q23). Imports excluding fuels and transportation equipment fell 22.7% yoy (20.3% contraction in 2Q23; -14.9% in 1Q23). At the margin, we estimate that imports fell 6.3% qoq/saar, (-16.6% in 2Q23; -9.8% in 1Q23).
Commodities continue to drag exports in July. Exports fell 30.8% yoy (-26.9% in June). The oil drag continued with a 26.2% yoy drop (-30.5% in June), dragged down by prices. Moreover, coal exports contracted 62.5% yoy (-48.5% in June), with a decline in both prices and volumes. Exports excluding traditional goods (oil, coal, coffee and ferronickel), accounting for 43% of total exports contracted a slight 0.8% yoy (+0.2% in June). In the quarter ending in July, exports contracted 21.5% yoy (stable versus 2Q23; -3.6% in 1Q23), dragged by a double-digit decline of coffee, fuels, oil, and agricultural exports. At the margin, exports contracted 6.7% qoq/saar (-7.7% in 2Q23; -9.4% in 1Q23).
The current-account deficit should narrow in 2023 as domestic demand weakens, leading to a lower trade and services deficit. We expect a CAD deficit of 3.5% of GDP (4.2% previously expected; 6.2% in 2022).