Itaú BBA - CHILE – Another large trade surplus in February

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CHILE – Another large trade surplus in February

Março 9, 2020

The quick correction of Chile’s external imbalances is a favorable development that could alleviate part of the pressure on the CLP.

CHILE – Another large trade surplus in February

A trade surplus of USD 821 million was registered in February, well above the USD 226 million last year, while milder than our USD 1.0 billion forecast. Trade data in the month showed the first effects of trade disruption amid the coronavirus spread. While both exports and imports dropped sharply, the impact from lower fuel prices and weakened consumer goods imports (on the back of a CLP depreciation) outweighed the hampered mining and manufacturing sales. As a result, the rolling 12-month trade balance rose to a USD 4.9 billion surplus, up from the USD 4.2 billion last year. At the margin, the trade surplus is at an even larger USD 9.7 billion annualized in the quarter ended in February (according to our SA adjustment; USD 5.5 billion in 4Q19). The quick correction of Chile� �s external imbalances is a favorable development that could alleviate part of the pressure on the CLP.

After the pickup in January (+8.9%), mining fell 1.8% YoY, while manufacturing exports declined 12.2% (7.9% drop in January). In the quarter ending in February, total exports fell a mild 1.7% yoy following the 10.4% drop in 4Q19. Mining exports and strong agriculture-related sales drove growth, while manufacturing exports remained weak (down 7.9%; 13.4% fall in 4Q19).At the margin, exports accelerated to 32.9% QoQ/SAAR, from the 11.0% drop in 4Q19 (0.3% fall in 3Q19), amid a widespread recovery from the October and November protest affected months and higher copper prices. Dynamism would moderate ahead as global growth slows amid the coronavirus outbreak.

Even before the current oil price plummet, energy imports fell 21.5% in February after rising 57.0% in January, leading to total imports dropping 18.2% yoy (2.9% fall previously). Energy imports account for around 3.8% of GDP, down from a 7% at the start of the last decade. Meanwhile, continued falls in consumer and capital goods imports underscore the weak domestic demand.In the quarter ending in January, consumer imports fell 17.5% (in line with 4Q19), capital imports shrunk 14.4% (16.2% drop in 4Q19). Energy imports still retained a positive contribution in the quarter (+5.3% yoy; 16% decline in 4Q19), but a slowdown going forward is expected. At the margin, imports fell 15.1% QoQ/SAAR and they are likely to weaken further ahead.

Despite the impact of the coronavirus on global growth (particularly China) and lower commodity prices, the current account deficit will likely narrow this year to 0.9% of GDP (3.2% expected for last year), amid a weaker CLP and poor internal demand growth. Nevertheless, if the recent developments in the global oil market persist, the CAD correction could be even swifter considering that Chile is a net-importer of oil.

 

Miguel Ricaurte
Vittorio Peretti

 



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