Itaú BBA - COLOMBIA – Large trade deficit in November

Macro Latam

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COLOMBIA – Large trade deficit in November

Janeiro 21, 2020

We expect the current account deficit to remain wide at around 4.5% of GDP for both 2019 and 2020.

Recovering imports, albeit led by fuels, amid a double-digit export drop led to the largest November trade deficit on record. The trade deficit of USD 1.7 billion (USD 0.9 billion deficit one year earlier) was broadly in line with market expectations and lifted the rolling 12-month trade deficit to USD 10.9 billion, from USD 10.6 billion as of September and USD 7.0 billion in 2018. At the margin, the trade deficit is sitting even wider at USD 12.4 billion (annualized) in the quarter ending in November (similar to that registered in 3Q19) as exports continued to decline in the quarter.

Colombian exports remained weak in November, still dragged by coal and oil sales. Total exports contracted 13.6% yoy, the sharpest decline since December 2018, led by the 35.0% drop of coal exports (similar to the prior month and driven by falling prices), while oil sales dropped 22.3% (18.7% decline previously, mostly due to lower volumes). Exports excluding traditional goods (oil, coal, coffee and ferronickel), accounting for just over a third of shipments abroad, increased 3.7% yoy (+5.0% in October). In the quarter ending in November, exports fell 12.6% (11.5% fall in 3Q19), dragged by commodity exports. At the margin, exports declined 13.5% qoq/saar, (29.1% fall in 3Q19), as recovering momentum of coal sales was partly offset by faster declines of oil and coffee exports.

Imports bounced back in November. Total imports (FOB) grew 6.5% yoy (-16.4% in October), lifted by a near doubling of fuels purchases and a double-digit rise for transportation equipment. Once fuel and transportation components are excluded, imports contracted 3.5% in November (-8.5% yoy previously) as consumer goods imports and purchases of manufacturing-related capital goods continued to shrink, highlighting the risks to activity that are consistent with depressed consumer sentiment and a deteriorating industrial outlook (according to think-tank Fedesarrollo). In the quarter ending in November, imports declined 3.1% yoy (5.1% fall in 3Q19) as capital goods imports dropped 6.3% (+6.5% in 3Q19), intermediate goods fell 2.2% (4.3% in 3Q10) and consumer goods imports slowed to 0.1% from 6.2% in 3Q19. At the margin, imports growth moderated to 0.1% qoq/saar from 1.5% in 3Q19.

We expect the current account deficit to remain wide at around 4.5% of GDP for both 2019 and 2020. Given our expectation of more robust global growth, benefiting Colombia’s exports, we believe that a further widening of the deficit is unlikely. Meanwhile, the central bank’s favorable assessment of the composition of the deficit financing means stable interest rates going forward remains the most likely scenario.

Miguel Ricaurte
Carolina Monzón

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