Itaú BBA - CHILE – Large trade balance result to start 2020

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CHILE – Large trade balance result to start 2020

Fevereiro 7, 2020

Still double-digit falls in consumer and capital goods imports underscore the weak domestic demand

Still falling imports along with accelerating mining exports led to a large trade surplus of USD 1.2 billion in January (similar to last year). The surplus came in just below the Bloomberg market consensus of USD 1.5 billion and our USD 1.3 billion call, with possible trade disruptions with China (amid the coronavirus spread) towards the end of the month restricting the trade balance. As a result, a USD 4.3 billion trade surplus was registered in the year ending in January (USD 4.2 billion in 2019 and USD 4.7 billion in 2018). Our own seasonal adjustment points at a higher trade balance surplus of USD 7.5 billion annualized in the quarter (USD 5.6 billion in 4Q19 and USD 3.5 billion in 3Q19). 

Exports fell 0.7% YoY in January (+1.3% in December, 7.6% drop in 2019) as improving mining sales were offset by declining manufacturing exports. The mining gain of 8.9% YoY was the first increase since August last year. In the quarter ending in January, total exports dropped a milder 3.5% YoY following the double-digit drop in 4Q19 (-5.2% in 3Q19) as mining exports moderated its decline to 1.6% (10.8% fall in 4Q19) and agriculture-related sales continued to grow, while manufactured exports dropped 9.3% YoY (10.4% fall in 4Q19). At the margin, exports accelerated to 14.5% QoQ/SAAR, from the 9.3% drop in 4Q19 (0.3% fall in 3Q19), amid a widespread recovery

Meanwhile, still double-digit falls in consumer and capital goods imports underscore the weak domestic demand. Imports dropped a milder 2.9% YoY (17.7% fall in December), but mainly due to fuel imports. In the quarter ending in January, capital imports shrunk 13.5% (similar to 4Q19; 4.0% fall in 3Q19), while consumer imports fell 13.6% (17.4% decline in 4Q19; 10.9% down in 3Q19). At the margin, imports fell 10.0% QoQ/SAAR, moderating from the 21.2% decline in 4Q19.

A large trade surplus is expected this year, in line with expectations of a sharp external deficit correction. With internal demand constrained and export growth normalizing, we expect the current account deficit to narrow to 0.4% of GDP this year (from the nearly 3% we estimate for last year). The swift external deficit adjustment will likely alleviate some pressure on the CLP.
 

Miguel Ricaurte
Vittorio Peretti



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