Govt lowers forecast for current account deficit after January data

Chennai: As the trade deficit printed lower in January, the forecast for Current Account Deficit (CAD) in FY23 has been lowered below $100 billion.

Emkay Global Research has brought down the CAD forecast for the financial year 2022-23 to $90 billion against its earlier forecast of $107 billion. The CAD-GDP ratio is now seen at 2.6 per cent in FY23 against 3.1 per cent earlier.
The estimate was brought down after the trade deficit sharply narrowed to $17.8 billion in January, from $22.1 billion in December The narrowing was led by continued consolidation in imports, even as exports remained weak. This was the lowest print in over 12 months and compares with the average $25.5 billion deficit seen in the second half of 2022.

Imports contracted on a yearly basis for the second consecutive month, despite a low base, with a massive 15.8 per cent sequential correction. This material fall was led by gold-imports collapse, while even oil imports were sequentially weak, despite stable oil prices, implying weaker volumes.

This trend may continue, as the combination of weaker demand and relatively-lower global commodity prices weighs on core imports growth, finds Emkay.
The robust trend in services trade continued, making new peaks each month. The services trade surplus hit an all-time high of $16.5 billion in January 2023.