Balance of payments
► The current account def c t (CAD) has reached $57.6 b ll on. As f rst halves go, H1 2017 CAD s $27.7 b ll on, about $10 b ll on h gher than H1 2017. Th s was ant c pated at the beg nn ng of the year, at least on account of the r s ng energy b ll. As the months of May go, th s s the h ghest def c t s nce May 2013.
► There s also a good or bad s gn, depend ng on how one nterprets t. The seasonally adjusted non-energy non-gold “core” def c t has been dropp ng stead ly, reflect ng the slowdown. Underly ng cool ng off seems set to l m t the def c t go ng forward. ► However, there are two p eces of bad news. Pr mo, exports aren’t grow ng at all n real terms desp te pr ma fac e f gures. The three-month mov ng average export rate of ncrease s about zero.
► Secondo, the f nanc al account can’t cover the def c t. Hence, reserves erode and res dents’ overseas depos ts are repatr ated, booked under regular and rregular accounts. Hence, the net errors and om ss ons tem posted $3.4 b ll on entry and reserves have been depleted by $2.8 b ll on. ► F nanc ng the CAD through regular cap tal and portfol o nflows has been mposs ble n the f rst f ve months. Cap tal nflows, yes; n the net they have been up by 5 percent. Nevertheless, the CAD st ll headed north by around 60 percent compared to last year.
► Th s s a very precar ous fund ng m x, and even f the CAD were to be the ma n r sk – wh ch t s clearly not - as a flow var able, the l ra would have been frag le nonetheless. In other words, even the CAD alone s a r sk h gh enough to render the l ra vulnerable, because of the deter orat ng fund ng qual ty, obv ously.