Itaú BBA - COLOMBIA – Still-wide trade deficit in 1Q20

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COLOMBIA – Still-wide trade deficit in 1Q20

Maio 14, 2020

Despite weak internal demand and a weaker currency, we expect a gradual narrowing of the current account deficit given the developments in the oil market.

The trade balance in March came in at a USD 1.0 billion deficit, in line with our call (Bloomberg market consensus: USD 0.9 billion), while somewhat larger than the USD 0.8 billion deficit recorded last year. As a result, the rolling 12-month trade deficit sits at USD 11.0 billion (ticking up from the USD 10.8 billion in 2018). Nevertheless, our own seasonal adjustment shows some correction at the margin given a sharper fall of imports. The trade deficit in the quarter edged down to USD 10.2 billion, annualized, from USD 11.9 billion in 4Q19. Going forward, some further correction is likely as a two-month nationwide lockdown hinders import demand, but low oil prices will curb the improvement.   

Import weakness at the close of 1Q20 was widespread. Imports shrunk 16.9% in March (+0.2% in February), with all three divisions (consumer, intermediate and capital) posting double-digit declines. Durable consumers goods fell 22.8% yoy (+4.2% in February), while fuels declined 25.5% (+8.6% previously) as global oil prices faltered. Capital goods purchases dropped 24.8% yoy (5.6% fall in February), led by notable drops in construction material and transport equipment. Even after excluding volatile fuel and transport purchases, total imports shrunk 13.5% in the month (+0.8% in February). In the first quarter of 2020, imports fell 5.5% (4.8% drop in 4Q19). At the margin, we estimate that imports dropped 14.8% qoq/saar, accelerating from 7.6% decline recorded in 4Q19, dragged by durable consumer, capital and fuel imports. 

Plummeting oil sales continued to hamper exports in 1Q20. Exports in the month of March registered the sharpest drop in four years as oil prices nosedived. Total exports contracted 28.5% yoy, led by the 59.8% drop of oil exports, which now sit at their lowest level since 2008. Oil prices in the month posted a 55.7% decline. Additionally, coal sales dropped 30.6% (24.3% decline previously, mostly due to lower prices). As a result, exports in 1Q20 fell 8.7% yoy, in line with the drop in 4Q19. At the margin, exports continued to decline at a mild pace of 3.2% qoq/saar, with decelerating oil exports being compensated by coal dynamics. Nevertheless, the latter’s recovery is likely to be short-lived as global GDP shrinks.

Despite weak internal demand and a weaker currency, we expect the narrowing of the current account deficit to be gradual (from 4.3% last year to 3.3% of GDP this year) given the developments in the oil market.

Miguel Ricaurte
Carolina Monzón



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