Overall, after the peak in July on the back of domestic demand pushing imports significantly upwards and a deterioration in the gold trade balance, the current account has adopted an improving trend. According to the provisional customs data released by the Ministry of Trade, the foreign trade deficit dropped by 56.8% to US$6.2bn in January from the record high level in the same month of the previous year. The data implies a sharp recovery in the January current account, given a large deficit in the same month of last year at US$10.5bn while providing support to the conjecture that the impact of the current policy framework on the external balances is getting stronger. Accordingly, the trend will likely continue in the period ahead with ongoing tightening in financial conditions, and hence a visible deceleration in growth.
Regarding the capital account on the other hand, given the policymakers’ priority to replenish reserves and higher external financing needs require continuation of the strength in capital inflows.