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External balances bolstered by
capital account.
In the second quarter, the current account deficit widened to US$ 453
million from US$ 24 million in the same quarter last year. The
deterioration resulted principally from strong imports but also from a
weakening in exports, which dropped 2.3% in the second quarter over the
same period in 2000. The worsening export performance was attributed
exclusively to the strong downturn observed in Colombia’s key traditional
export sectors, namely coffee and oil. Import growth, on the other hand,
remained strong, registering a 16.4% expansion. The resulting
deterioration in the annual trade balance, which reverted from a US$ 293.9
million surplus to a US$ 735.5 million deficit, was the main driver behind
the current account widening. Capital flows of US$ 474 million, up from
US$ 72 million in the second quarter of 2000, were sufficient to cover the
gap in the current account balance. As a result, reserves were up by US$
67 million in the second quarter, according to balance of payments data.
This month’s Consensus Forecast presages a further deterioration in the
current account, as a recovery in traditional exports is unlikely to
emerge in the current slide of the global economy. At the end of October,
the price per pound for the Colombian Arabica traded in New York dropped
to US$ 0.60, the lowest level observed in nine years. The coffee price
recovered some lost ground at the beginning of November, closing at US$
0.66 on 8 November. However, coffee prices are unlikely to rebound to the
levels observed last year. The current decline in oil prices is likely to
put further downward pressure on oil exports, unless OPEC decides to
implement further production cuts and successfully bolsters the oil
prices. Nevertheless, prices are unlikely to rebound this year – the
price on West Texas Intermediate averaged US$ 21.86 per barrel in October
and dropped further in early November, closing at US$ 20.10 per barrel on
9 November, down substantially from with US$ 30.37 last year. As a result
of lower exports, panellists expect the trade surplus to drop to a third
over last year, which will also cause a widening in the 2001 current
account deficit.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Colombia. For more details please click here.
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