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

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 and financial accounts and the evolution of the items included in them.

See the report (only in Spanish)

Publication Date:
Tuesday, 12 September 2023

1. Overall results of the Balance of Payments

During the second quarter of 2023, the current account of the country’s Balance of Payments registered a USD 2,524 million deficit, equivalent to 3.0% of quarterly gross domestic product (GDP). The financial account, including the change in reserve assets (USD 365 m), recorded net inflows of USD 2,846 million (3.3% of quarterly GDP). Errors and omissions were estimated at USD -322 million.

By components, the deficit in the current account (USD 2,524 million) in the second quarter of 2023 was caused by net primary income outflows of USD 3,402 million, deficit balances in foreign trade of goods of USD 1,713 million, and deficit balances in services trade of USD 428 million. These results were partially offset by net income from secondary income (USD 3,018 million) (Graph 1).

Graph 1. Components of Colombia’s Balance of Payments current account

Figures in millions of dollars
The chart shows the evolution of the trade balance, factor income, current transfers, and current account from 2017 to the first quarter of 2023. In 2021, the largest deficits in the trade balance were evident: -$5.026 billion in the second quarter, -$5.258 billion in the third quarter, and -$5.958 billion in the last quarter of the year. For the first quarter of 2023, the trade balance was -$2.382 billion, factor income was -$4.137 billion, current transfers were reflected at $3.097 billion, and the current account was -$3.422 billion.

Figures as a percentage of GDP
The graph shows the evolution of the trade balance, factor income, current transfers, and current account from 2017 to the first quarter of 2023. In 2021, the largest deficits in the trade balance were evident, with a deficit of -6.80% of GDP in the second quarter, -6.03% in the third quarter, and -6.88% in the last quarter. For the first quarter of 2023, the trade balance represented -2.95% of GDP, factor income -5.12%, current transfers accounted for 3.83%, and the current account stood at -4.23% of gross domestic product.

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

In the financial account for the second quarter of 2023, net capital inflows are estimated at USD 2,846 million, corresponding to foreign capital inflows (USD 4,219 million), Colombian capital outflows (USD 1,764 million), payments from non-residents to residents for gains in financial derivatives transactions (USD 756 million), and the increase in foreign reserves due to Balance of Payments’ transactions (USD 365 million) (Graph 2).

Graph 2. Components of Colombia's Balance of Payments financial account

Figures in millions of dollars
The graph shows the evolution from 2017 to the first quarter of 2023 of Colombian capital outflows, foreign capital inflows, and the financial account, that is, 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; as well as the highest level of foreign capital inflows, at $10.976 billion. For the first quarter of 2023, Colombian capital outflows were $2.927 billion, and foreign capital inflows were $5.754 billion, leaving the financial account at -$2.827 billion.

Figures as a percentage of GDP
The graph shows the evolution from 2017 to the first quarter of 2023 of Colombian capital outflows, foreign capital inflows, and the financial account, that is, 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 first quarter of 2023, Colombian capital outflows represented 3.6% of GDP, foreign capital inflows -7.1%, placing the financial account at -3.5% 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 current account. For example, if the current account is in deficit, the financial account is negative, indicating that the economy is resorting to external financing and/or liquidating its external assets to finance its excess current expenditure.
Source: Banco de la República


2. Quarterly and annual evolution of the current and financial accounts of Colombia's Balance of Payments

a) Current account

The estimated current deficit for the second quarter of 2023 (USD 2,524 million, 3.0% of GDP), compared to the immediately preceding quarter, decreased by USD 861 million, mainly due to the reduction in net primary income outflows and the lower deficit in the trade balance of goods and services (Graph 1).

For the accumulated period of January-June 2023, the current deficit (US$6,112 million, 3.7% of GDP), compared to the same period of 2022, is lower by USD 1,950 million, a behavior that is mainly explained by the reduction of the deficit balance of foreign trade in goods and services, partially offset by the increase in net primary income outflows.

The current account deficit in the first quarter of 2023 was 4.2% of GDP. In the previous quarter, it was 6.0%.

b) Financial account

Net capital inflows of USD 2,846 million (3.3% of GDP) recorded in the financial account during the second quarter of 2023 registered a similar level compared to the immediately preceding quarter. This result is explained by higher capital inflows linked to direct investments, which were offset by lower external debt.

During the first half of 2023, compared to the same period in 2022, the financial account (USD 5,677 million, 3.4% of GDP) showed lower net inflows of USD 4,365 million, a dynamic that is mainly explained by the lower external financing of loans and debt securities, which is partially offset by lower capital outflows to constitute Colombia’s direct investment abroad.

Net inflows in the first quarter of 2023 represented 3.5% of GDP. In the previous quarter, it was 6.3%.

Net capital inflows in the first quarter of 2023 represented 3.5% of GDP. In the previous quarter, they were 6.3%.

3. International Investment Position (IIP)

At the end of June 2023, Colombia recorded a negative net International Investment Position of USD 187,271 million (56.0% of annual GDP), resulting from assets of USD 241,882 million (72.3% of annual GDP) and liabilities of USD 429,153 million (128.4% of annual GDP). Of the total balance of assets, 32.5% corresponds to portfolio investment, 29.9% to Colombia’s direct investment abroad, 23.9% to reserve assets, and the remaining 13.8% to other assets, which include loans, other external credits, offshore deposits, and financial derivatives. Liabilities are broken down into 57.0% for foreign direct investment, 22.3% for other liabilities (where external loans stand out), and the remaining 20.7% for portfolio investments.

Graph 3. International Investment Position as of June 2023 (USD 180,616 million, 53% of GDP 1)

Assets
USD 241.882 m
The chart shows the asset percentages of the international investment position as of March 2023. Direct investment, 30.5%. Portfolio investment, 31.9%. Derivatives, 0.3%. Other investments, 13.0%. Reserve assets, 24.3%.

Liabilities
USD 429.153 m
The chart shows the percentages of liabilities in the international investment position as of March 2023. Direct investment, 56.7%. Portfolio investment, 20.2%. Derivatives, 0.0%. Other investments, 23.1%.


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

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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).