Capital outflows reach alarming levels

The current account registered a $2.1 bln deficit in November, close to the market consensus ($2.0 bln) and our forecast ($2.2 bln). As expected, on a 12m rolling basis the deficit further declined to $34.7 bln (4.7% of GDP) from $38.4 bln (5.5%) a month before. The drop mainly stemmed from the gradual contribution of lower oil prices to energy import costs as well as weak imports. Given that oil prices ended the year below $40/bbl, we expect the current account deficit to end the year below 5.0% of GDP.

The non-energy surplus rose to $275 mln in November from $19 mln last year. This took the 12m rolling non-energy balance to -$56 mln in November from -$2.1 bln in October. This could reverse in a couple of months, as we expect imports to accelerate with the improvement in business and consumer confidence.

Capital flows fell sharply in 12m rolling terms, to $13.1 bln from $21.2 bln in October. The main culprit was portfolio investments, which dropped to $7.3 bln from $13.6 bln in October, and other investments, which declined from $19.3 bln to $16.7 bln. FDI rose to $10.1 bln from $9.2 bln in October. Short term debt repayments increased from $15.9 bln to $22.1 bln, while long term loan use expanded to $38 bln from $34.9 bln. Overall financing fell considerably short of the 12m rolling current account deficit in November and required the use of reserves. The $34.7 bln current account deficit was financed by $13.1 bln in capital inflows and $10.8 bln of reserves in November (versus $9.8 bln in October). The remaining $10.8 bln was registered as net errors and omissions.