Colombia: Growth accelerates in the second quarter
According to the latest GDP data released by the National Statistical Institute (DANE) on 22 August, the economy accelerated on the back of a rebound in fixed investment and a pick up in private consumption. In annual terms, GDP expanded 2.8% in the second quarter, up from 2.2% in the first quarter.
Looking at a breakdown of the components, domestic demand accelerated to 2.5% in the second quarter, up from 1.5% in the first quarter. Private consumption rose 2.7% in Q2 amid a jump in consumer confidence to the highest level in a year, which followed a 2.0% expansion in Q1. Meanwhile, fixed investment rebounded, growing 1.7% in Q2 following a 0.7% contraction in Q1. A recovery in the output of machinery and equipment, and cultivated biological resources drove the upturn in fixed investment. Government spending, on the other hand, expanded at a slightly slower pace of 5.6%, down from 6.0% in the first quarter.
While exports rebounded in the second quarter, the external sector dragged on growth in Q2 as imports accelerated more sharply. Exports rose 3.0% in Q2 after a 0.7% drop in the previous quarter. Meanwhile, imports climbed 5.5%, contrasting a 1.4% contraction in Q1. Thus, the overall contribution of the external sector to growth was negative in the second quarter, following a positive reading in the first quarter.
In seasonally-adjusted, quarter-on-quarter terms, however, economic growth lost pace, declining from 0.9% in Q2 to 0.6% in Q1, owing to a cutback in government consumption compared to the previous quarter which was partly offset by a strong recovery in fixed investment. While the recovery in economic activity is seen picking up in the coming quarters, thanks to improving domestic demand and higher projected global oil prices, a high fiscal deficit continues to pose risks to long-term fiscal sustainability.