Macro Latam< Voltar
The external imbalance correction process continued in February. The trade deficit came in at USD 817 million in February, broadly in line with our forecast and slightly larger than Bloomberg’s market consensus of USD 723 million. The deficit is smaller than the USD 1.0 billion recorded one year ago. As a result, the rolling 12-month trade deficit narrowed to USD 10.8 billion from USD 11.8 billion in 2016 (USD 15.9 billion in 2015). The recent narrowing is mostlydue to an improvement in the energy balance. At the margin, the trade deficit is also declining gradually. The annualized trade deficit (using our seasonal adjustment) dropped to USD 7.7 billion in the quarter ending in February, from the USD 8.1 billion deficit estimated for 4Q16.
Consumer and intermediate goods led import growth. Imports increased 5.4% year-over-year in February (+0.2% previously), resulting in a 0.7% rise in the quarter ending in February (-8.4% in 4Q16). This is the first moving-quarter annual increase since February 2015.Consumer goods imports slowed in February, likely due to the cooling of advanced purchasing as the increased VAT rate was implemented. Nevertheless, consumer goods imports rose 12.8% year-over-year in the quarter (+6.5% in 4Q16). Intermediate goods imports gained 1.2% in the quarter (-6.2% in 4Q16), with the improvement in industrial related imports supporting the recovery. Energy imports remain a drag in the quarter, however, growth was recorded in the month of February, ending five consecutive months of decline (possibly reflecting the increased operations at the Cartagena refinery). Capital goods imports continue to decline in the quarter but less than in previous months, suggesting that the deterioration of investment may have passed its worst point. At the margin, we estimate that imports increased 23% qoq/saar, building on the 13% rise in 4Q16.
Natural resource-related exports continued to perform favorably. In the month, the pick-up in oil prices from one year ago offset the decline in export volumes. The same trend can be seen for coal and coffee exports. Total exports increased 15.8% year over year in February (42.8% previously) leading to a 30.1% rise in the quarter ending in February (+14.4% in 4Q16 and -8.8% in 3Q16). This is the highest moving quarter annual increase since the quarter ending in February of 2012, as the terms of trade improve. Oil exports rose 46.3% in the quarter (2.7% in 4Q16), while both coal and coffee exports increased by more than 50% in the quarter from one year ago. Meanwhile, exports excluding oil, coal, coffee, and ferronickel (Colombia’s traditional exports) continue to grow but at a slower pace (6.5% vs. 12.1% in 4Q16). We estimate that at the margin total exports increased at an annualized quarter over quarter rate of 69% (73% in 4Q16 and 4% in 3Q16), lifted by coffee and coal exports.
As oil prices stabilize at a higher level than in previous years and domestic demand remains fragile, further narrowing of the trade deficit is likely. As a result, we see the current account deficit shrinking to 3.6% of GDP from the 4.4% of GDP last year.