COLOMBIA – Wide trade deficit in August

The swift recovery of internal demand and higher income deficit would offset the positive effect on exports of high terms of trade.

Andrés Pérez M. & Carolina Monzón

19/10/2021


Despite exports recovery, a swifter domestic demand improvement resulted in the trade deficit widening by USD 0.8 billion over one year to register a USD 1.6 billion deficit in August. The trade deficit came in between the Bloomberg median estimate (USD 1.5 billion) and our forecast of USD 1.9 billion. As a result, the rolling 12-month trade deficit sits at USD 13.5 billion, larger than the USD 12.5 billion as of June (USD 10.6 billion in 1Q21). At the margin, the quarterly trade deficit remained broadly stable from 2Q21 at USD 16.5 billion (annualized).

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The import recovery is widespread. Total imports (FOB) grew 45.4% year-over-year in August (+29.3% previously), lifted by intermediate goods imports (fuels as well as industrial inputs), a meaningful acceleration of durable consumer goods imports and capital goods linked to manufacturing and transportation. In the quarter ending in August, imports grew 46.4% year-over-year (+57.1% in 2Q and 5.2% in 1Q21). At the margin, we estimate that imports expanded 25.5% qoq/saar, moderating from the 55.9% expansion recorded in 2Q21 as durable and intermediate goods lost momentum. ​​​​​​

Exports grew 28.4% YoY, moderating from the 32.5% increase in July as the oil export pull eased. Exports excluding traditional goods (oil, coal, coffee, and ferronickel), accounting for around a half of shipments abroad, increased 28.0% YoY (27.4% previously). Coal exports rose 77.5% building on the 38.5% increase in the previous month, as price gains remained upbeat (while the decline in volumes moderated). Meanwhile, oil exports grew 6.2% YoY, slowing from the 27.0% rise in July as volumes continue to contract and prices gained a milder 56.5% from last year (compared to doubling in prior months). In the quarter ending in August, exports grew by a third from last year (+45% in 2Q21; 1.5% in 1Q21), while at the margin, exports increased by 13.3% qoq/saar, up from 8.2% in 1Q21.  ​​​

We expect a current account deficit of 5.0% of GDP for this year, surpassing the 3.3% registered last year. The swift recovery of internal demand and higher income deficit would offset the positive effect on exports of high terms of trade. For 2022 we foresee CAD at still wide 4.5% of GDP.