Colombia - Economic Briefing April 2004

Economy Set for Further Recovery  (continued)

Current account deficit widens trade balance narrowing
In the fourth quarter, the current account balance registered a deficit of US$ 492 million.  The deficit was well above the third quarter deficit of US$ 314 million and virtually on par with the US$ 490 million deficit recorded in the fourth quarter of 2002.  The widening over the third quarter deficit was due principally to a moderate deterioration in the trade balance.  Exports grew a healthy 7.9% over the same quarter last year, driven by robust growth rates in gold, coal and nickel exports.  Import growth, however, exceeded the export expansion with 8.5% growth, as capital goods imports picked up speed amid the more favourable domestic demand setting.  As a result, the annual current account deficit reached US$ 1.4 billion in 2003, which was down only moderately from the US$ 1.5 billion deficit figure registered in 2002.  Consensus Forecast participants anticipate the current account deficit to widen to US$ 1.9 billion this year.

Shifts in portfolio investment dominate capital account
The capital account registered a surplus of US$ 148 million, which was not sufficient to cover the deficit in the current account.  The fourth quarter capital account surplus was less than a third the US$ 552 million third quarter surplus and also less than the surplus registered in the fourth quarter 2002.  The decline in the capital account surplus was attributable to more pronounced portfolio investment outflows, as foreign direct investment actually experienced an increase over the previous quarter.  As a result of the fourth quarter reading, the annual capital account surplus narrowed to US$ 833 million last year from US$ 1.3 billion in 2002.