Chile’s trade balance likely shrunk again in June for fall in exports

Chile’s exports and imports are likely to have dropped again in June on a year-on-year basis. According to a Societe General research report, Chile’s June trade balance is expected to have lowered to $240 million from June 2015’s $553 million.

Exports are expected to have declined 11.1 percent year-on-year, whereas imports are likely to have dropped 5.8 percent year-on-year. Last year, Chile’s trade surplus declined to nearly half the level recorded in 2014 due to a rapid fall in exports that were down 17 percent year-on-year on average.

The pace of decline in exports has decelerated in 2016 with exports still falling faster than imports. But exports had increased 1.6 percent in May as industrial exports grew for the first time in more than one year and due to a low comparison base.

Meanwhile, imports had increased 0.6 percent in May with the help of recovery in durable goods imports and the persistent increase in capital goods imports. But exports and imports are expected to have dropped again in June.

In 2012, low commodity prices pushed the current account balance down to -3.7 percent of GDP, whereas in 2013 it was -3.6 percent of GDP as export growth collapsed.

This led to a decline in domestic demand, especially investment, resulting in a further decline in imports in 2014, assisting the current account balance to rebound markedly. Last year, growth in import continued to be under pressure; however, exports fell at a more rapid pace that caused the current account balance to drop again to -2 percent of GDP.

Subdued domestic and foreign demand is expected to impact trade activities in 2016, therefore hurting the prospects of any significant economic recovery, according to Societe Generale.