Domestic demand is recovering, but remittances remain upbeat resulting in a narrow CAD. A USD 2.2 billion current account deficit was registered in the fourth quarter of the year (2.1% of GDP; USD 0.4 billion larger than in 4Q23). The deficit was between the Bloomberg market consensus of USD 2.0 billion and our USD 2.9 billion call. Despite an increase in the trade and services deficit, a rise in transfers contained the CAD in the 4Q24. As a result, the rolling 4Q current account deficit increased mildly from 3Q24 by 0.1pp to 1.8% of GDP (2.2% in 2023), the lowest rate since 2005. At the margin, our own seasonal adjustment shows the annualized deficit sits at 1.8% of GDP, 0.3pp wider than in 3Q24.
In 2024, the current account deficit narrowed despite softer exports. The 1.8% CAD deficit in 2024 was in line with the BanRep’s estimate. The narrower current account deficit in the year was mainly explained by rising transfers (+20%; +5% in 2023). Exports contracted 3% (-11% in 2023) and imports grew a mild 1%, after the 17% decline in 2023. Meanwhile, the income deficit fell 2% from one year ago.
Imports improved by the end of 2024. Exports increased by a mild 0.2% yoy during 4Q24 (-1.4% yoy in 3Q24), while imports rose 6.4% (+5.4% in 3Q24), signaling a gradual domestic demand recovery. Overall, the goods trade deficit widened by USD 0.9 billion from 4Q23. The services deficit increased by USD 0.2 billion to USD 0.5 billion. Meanwhile, transfers reached a historical record of USD 4.2 billion (rising USD 0.8 billion from 4Q23). The income deficit remained broadly stable at USD 3.2 billion (down from the USD 4.8 peak in 3Q22).
Foreign direct investment increased in the 4Q, while the overall financing of the CAD remains favorable. Direct investment into Colombia came in at USD 4.4 billion in 4Q24, USD 0.9 billion up over one year. Net direct investment reached USD 2.8 billion in 4Q24, USD 0.4 billion down over one year. Overall, net direct investment achieved a 130% coverage of the CAD (187% in 2023; 66% in 2022).
Our Take: The current account deficit is historically low. We expect some widening to 2.8% of GDP this year (BanRep: 2.5%) as domestic demand recovers. Nevertheless, strong remittance dynamics tilt the bias towards a narrower deficit.