Colombia: Decline in GDP moderates in Q4
According to preliminary data, GDP contracted 3.6% in annual terms in the last quarter of 2020, moderating notably from Q3’s 8.5% dive and beating market expectations of a sharper drop. All-in-all, the economy tumbled 6.8% in 2020, contrasting 2019’s 3.3% expansion and logging the worst reading in series’ history.
Looking at the details of the release, Q4’s softer downturn was largely due to an improvement in domestic demand: Household consumption fell at a significantly milder rate of 2.2% year-on-year in Q4 compared to Q3’s 9.0% slide, supported by relatively loose restrictions throughout the quarter. Similarly, the decline in fixed investment moderated, albeit only marginally, still logging a notable 16.1% contraction in Q4 (Q3 2020: -20.0% yoy). Meanwhile, government spending growth picked up pace to 4.0% in the final quarter of the year, up from Q3’s 3.8%.
On the external front, exports of goods and services plunged 20.9% on an annual basis (Q3 2020: -22.1% yoy), amid still-subdued foreign demand. Meanwhile, imports of goods and services slid 15.6%, falling at a markedly milder pace than Q3’s 22.4% freefall.
Lastly, on a seasonally-adjusted quarter-on-quarter basis, GDP expanded 6.0% in Q4, easing from Q3’s 9.4% jump.
Commenting on the outlook ahead, Daniel Velandia and Camilo Durán, analysts at Credicorp Capital, said:
“Mobility has started to bounce since Feb-21 amid lower pressures from the virus, suggesting that the setback was short-lived, at least compared to the previous contagion phases. We maintain a GDP growth forecast of 4.8% for 2021, though this result will be highly sensitive to potential future restrictions on activity should virus pressures intensify again, which in turn is a function of the upcoming vaccination program.”
However, Felipe Camargo, senior economist at Oxford Economics, expects a stronger rebound in 2021:
“National accounts data for Q4 leaves GDP only 3.5% below its pre-pandemic level, just two quarters after a sharp 17% q/q contraction in the Q2 2020 trough. This indicates a 4.8% carry-over into 2021, and we expect a 1.9% increase during the year to bring our 2021 GDP growth forecast to 6.7%. This also implies that quarterly pre-pandemic output levels should recover by Q4 2021, making Colombia one of the first countries to do so, second only to Brazil.”