BOGOTA Colombia's current account deficit shrank 36.3% in the first quarter compared with the same period last year, to $3.42 billion, the central bank said on Thursday, due to a reduced trade imbalance.

The deficit was $5.37 billion between January and March 2022.

The deficit is a broad measure of transactions between the country and the rest of the world. It encompasses trade, interest payments, dividends, remittances and services like tourism.

"The estimated current account deficit for the first quarter of 2023 ... was principally explained by a reduction in the deficit of the balance of commercial goods and foreign commerce in services," the central bank said in a statement.

In the first quarter the figure was equivalent to 4.2% of the country's gross domestic product.

Foreign direct investment was down 10.9% during the quarter to $4.3 billion, compared with the same quarter a year earlier. Nearly a third - 31% - of foreign investment was directed toward the mining and oil sector.

Capital outflows also fell during the quarter, decreasing by 10% to $3 billion.

The central bank's technical team estimates that the current account deficit will fall to 4.1% of GDP this year, from 6.2% of GDP in 2022, due to reduced domestic demand amid a slowing of the local economy.

(Reporting by Nelson Bocanegra; Writing by Julia Symmes Cobb; Editing by Daniel Wallis)