Report on the Evolution of the Balance of Payments and International Investment Position - Fourth Quarter 2023

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AUTHORS AND/OR EDITORS
Office for Monetary Policy and Economic Information
Technical and Economic Information Department

The quarterly report on the performance of Colombia’s balance of payments and international investment position describes the main results for the country's current account and financial account, and the evolution of the items that comprise them.

 See the report here (only in Spanish)

Publication Date:
Friday, 01 March 2024

1. Overall results of the balance of payments

During the third quarter of 2023, the current account of Colombia’s balance of payments registered a USD 2,293 million (m) deficit, equivalent to 2.3% of quarterly GDP. In turn, the financial account, including the change in reserve assets (USD 496 m), recorded net capital inflows of USD 1,621 m (1.6% of quarterly GDP). Errors and omissions were estimated at USD 672 m.

By components, the USD 2,293 m deficit in the current account in the fourth quarter of 2023 was caused by: net factor income outflows of USD 3,568 m and by deficit balances in the foreign trade of goods (USD 1,869 m) and in the services trade (USD 267 m). These results were partially offset by net income from current transfers for USD 3,411 m (Graph 1).

Graph 1. Components of the current account of Colombia’s balance of payments

Figures in millions of dollars
This first panel shows the evolution from 2017 to the fourth quarter of 2023 of the trade balance, factor income, current transfers and the current account. In 2021, the largest deficits in the trade balance are evident, where in the second quarter it was -5,026 million dollars, in the third quarter it was -5,258 and in the last quarter of the year, it was 5,958 million dollars. For the fourth quarter of 2023, the result of the trade balance was -2,136 million dollars, factor income was -3,568 million dollars, current transfers were reflected in 3,411 million dollars, while the current account was -2,293 million dollars.

Figures as a percentage of GDP
This second panel shows the evolution from 2017 to the fourth quarter of 2023 of the trade balance, factor income, current transfers and the current account. In 2021, the largest deficits in the trade balance are evident, where in the second quarter it was -6.80% of GDP, in the third quarter it was -6.03% and in the last quarter of the year, 6.88%. For the fourth quarter of 2023, the trade balance represented -2.11% of GDP, factor income -3.53%, current transfers were reflected in 3.37%, while the current account stood at -2.27% of gross domestic product.

Source: Banco de la República (the Central Bank of Colombia)

In the financial account for the fourth quarter of 2023, net capital inflows are estimated at USD 1,621 m, corresponding to foreign capital inflows (USD 8,081 m), Colombian capital outflows (USD 6,843 m), payments from non-residents to residents for gains in financial derivatives transactions (USD 879 m), and the increase in foreign reserves due to balance of payments transactions (USD 496 m) (Graph 2).

Graph 2. Components of the financial account of Colombia’s balance of payments

Figures in millions of dollars
This first panel shows the evolution from 2017 to the fourth quarter of 2023 of Colombian capital outflows, foreign capital inflows, and the financial account, i.e., the sum of capital outflows and capital inflows. For the third quarter of 2021, the highest level of capital outflows was recorded, at 6.472 billion dollars; as well as the highest level of foreign capital inflows, at 10.976 billion dollars. For the fourth quarter of 2023, Colombian capital outflows were 6.460 billion dollars, foreign capital inflows were 8.081 billion dollars, placing the financial account at -1.621 billion dollars.

Figures as a percentage of GDP
This second panel shows the evolution from 2017 to the fourth quarter of 2023 of Colombian capital outflows, foreign capital inflows, and the financial account, i.e. the sum of capital outflows and capital inflows. For the third quarter of 2021, one of the highest levels of capital outflows was recorded, representing 8.1% of GDP; as well as the highest level of foreign capital inflows, representing -13.7% of GDP. For the fourth quarter of 2023, Colombian capital outflows represented 6.4% of GDP, foreign capital inflows -8.0%, placing the financial account at -1.6% of gross domestic product.

Note: According to the Sixth Edition of the International Monetary Fund's Balance of Payments Manual, the financial account is presented with the same sign as the checking account. For example, if the checking account is in deficit, the financial account is also negative, indicating that the economy is resorting to external financing and/or liquidating its external assets to finance its excess current spending.
Source: Banco de la República (the Central Bank of Colombia)

2. Quarterly and annual evolution of the current account and the financial account of Colombia’s balance of payments

The estimated current deficit for the fourth quarter of 2023 (USD 2,293 m, 2.3% of GDP) increased by USD 340 m compared to the immediately preceding quarter, mainly due to the higher deficit in the trade balance of goods and services, partially offset by lower net factor income outflows and higher net income from current transfers (Graph 1).

For 2023, the current deficit (USD 9,715 million, 2.7% of GDP) is lower by USD 11,652 m compared to 2022. This performance is mainly explained by the reduction of the deficit balance of foreign trade in goods and services and lower net factor income outflows.

The current account deficit in the fourth quarter of 2023 was 2.3% of GDP. In the previous quarter, it was 2.0%.

b) Financial account

Net capital inflows of USD 1,621 m (1.6% of GDP) recorded in the financial account during the fourth quarter of 2023 showed a reduction of USD 78 m compared to the immediately preceding quarter. This result is explained by higher deposits and portfolio investments abroad, which were partially offset by higher external financing through debt securities.

During 2023 (USD 8,880 m, 2.4% of GDP), vis-a-vis 2022, the financial account exhibited lower net inflows of USD 11,587 m, mainly explained by lower external financing through loans and debt securities and higher outflows to constitute assets for other investments abroad.

Net capital inflows in the fourth quarter of 2023 accounted for 1.6% of GDP, compared with 1.7% in the previous quarter.

3. International Investment Position (IIP)

At the end of December 2023, Colombia recorded a negative net international investment position of USD 192,316 m (52.6% of annual GDP), resulting from assets of USD 255,909 m (69.9% of annual GDP) and liabilities of USD 448,225 m (122.5% of annual GDP). Of the total balance of assets, 33.9% corresponds to portfolio investment, 29.6% to Colombia’s overseas direct investment, 23.3% to reserve assets, and the remaining 13.5% to other assets, which include loans, other foreign credits, deposits abroad, and financial derivatives. Liabilities are divided into 56.7% for foreign direct investment, 22.5% for other liabilities (where external loans stand out), and the remaining 20.7% for portfolio investments.

Graph 3. International investment position as of December 2023 (USD 192,316 m, 52.6% of GDP1 1)

Assets
USD 255,909 m
This chart shows the percentages of assets in the international investment position as of December 2023. Direct investment, 28.6%. Portfolio investment, 33.9%. Derivatives, 0.7%. Other investment, 13.5%. Reserve assets, 23.3%.

Liabilities
USD 448,225 million
The chart shows the percentages of liabilities in the international investment position as of December 2023. Direct investment, 56.7%. Portfolio investment, 20.7%. Derivatives, 0.0%. Other investment, 22.5%.

1 The GDP figure in US dollars corresponds to the sum of the last four quarters.

Report on Evolution of the Balance of Payments and International Investment Position (Complete issues - available sice 2024)

This report describes the main results of the quarterly and annual evolution of the country's balance of payments.

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Note 01 September 2021: Current account statistics of the balance of payments were revised from 2015 to 2020 as a result of: i) the findings of the reconciliation exercise of external sector statistics and net lending of financial accounts published by Banco de la República and the Rest of the World Account of the System of National Accounts (SNA) disclosed by the National Administrative Department of Statistics (DANE in Spanish) that evidenced differences in the values of free trade zone exports; and ii) improvements in the sources of information and estimation methods implemented by Banco de la República between 2015 and 2020. As a result of the above, the current deficit was revised downward between 0.07 percentage points (pp) and 0.2 pp of Gross Domestic Product (GDP) in dollars for the periods 2015 and 2017. On the other hand, for the years 2018 to 2020, the revision implied an increase in the deficit level between 0.16 pp and 0.18 pp of GDP in dollars. The details of this revision can be consulted in the Statistical Review document of the current account of Colombia’s Balance of Payments. Statistical Review document of the current account of Colombia’s Balance of Payments (Only in Spanish).