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Current account balance
improves in fourth quarter, as imports drop at a quicker rate than exports
According to preliminary information provided
by the Central Bank, the current account balance registered a deficit of
US$ 114 million in the fourth quarter last year. This was well below the
current account deficit in the same quarter the previous year (US$ 307
million) and also substantially lower than the third quarter deficit of
US$ 627 million. For the full year, the current account balance
registered a deficit of US$ 903 million, compared to US$ 989 million in
2000.
The persistence of the import compression in
the fourth quarter 2001 is the main reason behind the improvement in the
current account. Imports contracted 15.4% (according to balance of
payments data) amid weak domestic demand and thus more than compensated
for the sluggish global economy, which lowered exports by 12.7% compared
to the same quarter the year before. As a result, the trade balance
improved from the US$ 386 million surplus in Q4 2000 to US$ 448 million,
which compensated for the very weak third quarter, when the trade deficit
reached US$ 120 million. For the full year, the trade balance improved
slightly from US$ 1.4 billion surplus in 2000 to US$ 1.7 billion.
The main driver in last year’s performance was
the development of copper prices, which dropped 11.2%. As a result,
copper exports, which accounted for 38.7% of total exports, dropped 8.2%
despite a significant increase in volume. Consensus Forecast panellists
do not see a major recovery in copper prices this year. Despite subdued
copper prices, exports should pick up this year, in particular, towards
the end of the year. For the full year, panellists expect exports to
grow. Since the pickup in domestic demand should also boost imports the
trade balance surplus is seen to drop.
The capital account surplus (excluding
international reserves) dropped from US$ 883 million in the fourth quarter
of 2000 to US$ 255 million, which was also below the US$ 493 million
surplus recorded in the third quarter. Nevertheless, the fourth quarter
surplus was more than sufficient to cover the gap in the current account
balance. For the full year, however, the capital account surplus fell
short of covering the current account gap, as net inflows dropped from US$
1.2 billion in 2000 to US$ 720 million. The capital account deteriorated
despite a significant improvement in foreign investment flows, which
reverted from a US$ 1.4 billion deficit in 2000 to a US$ 636 million
surplus in 2001. Higher direct investment inflows drove the improvement,
whereas portfolio investment remained virtually unchanged compared to
2000. The decline in the capital account surplus was prompted by a sudden
drop in other short-term capital flows.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Chile. For more details please click here.
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