Rising crude prices increases CAD forecast to $45 billion: Report

• Follow

A brokerage report from Barclays has revised its Current Account Deficit (CAD)  forecast upwards to$45 billion or 1.4% of GDP by March, owing to the massive spike in commodity prices led by crude oil, is set to put pressure on the fragile recovery.

The worries arise from the fact that the trade deficit has been on a continuous rise since July, the report said.

In June the average monthly deficit was at $12 billion and that increased to $16.8 billion in July to October, with September showing the highest-ever trade deficit on record at $22.6 billion, it said.

Monthly services surplus improve

The brokerage has raised its current account deficit forecast by estimating that every $10 per barrel rise in global crude prices will expand the trade deficit by $12 billion or 35 basis points of GDP, as nearly 85% of the oil demand is met through imports.

However, it ruled out any alarming situation and added that with record high foreign reserves, the brokerage does not see any major risks to macro stability. The expanding deficit trend may continue for some time as combination of demand recovery and rising commodity prices will continue to widen the trade deficit sharply.

The monthly services surplus improved from an average of $6.6 billion in 2019 to $7 billion in 2020 and to $8 billion in the first nine months of 2021, which is a positive.