India has reported strong balance-of-payments (BoP) data for Q3-FY15 (quarter ended December 2014).
The trade deficit was much narrower than expected, and the banking sector saw larger-than-expected inflows versus our forecast of outflows. This, and lower oil prices thus far in Q4-FY15, prompts to revise the FY15 current account (C/A) deficit forecast to 0.9% of GDP from 1.5%.
Standard Chartered Bank notes as follows on Wednesday:
- We expect a C/A surplus in Q4-FY15 for the first time since March 2007 as lower oil prices boost the positive seasonal effect during the quarter.
- We expect a larger BoP surplus of USD 53.7bn in FY15 versus our previous forecast of USD 35.6bn.
- Our FY16 C/A deficit and BoP forecasts remain unchanged at USD 26.5bn (1.1% of GDP) and USD 48.5bn, respectively, although we have slightly adjusted our forecasts for C/A deficit components. This implies that we expect a narrow C/A deficit in FY15.
- We expect it to widen from FY16 onwards, albeit at a gradual pace. We base this non-consensus call on our FY16 forecast for ICB oil of USD 83/barrel (bbl) versus USD 86/bbl in FY15.