Colombia: Economy loses steam in Q4, with a slower overall pace of expansion in 2017
February 22, 2018
The economy lost ground in 2017, as full-year economic growth fell short of the level reached in the preceding year, edging down to 1.8% from 2.0% in 2016. The result slightly undershot market expectations of an expansion of 1.9%. In the fourth quarter, annual GDP growth slowed to 1.6%, down from a revised 2.3% in the third quarter (previously reported: +2.0% year-on-year). A loss of momentum on the domestic side of the economy and in the external sector, fueled the downturn. Economic growth in seasonally-adjusted, quarter-on-quarter terms fell to 0.3% in Q4, markedly down from 0.8% in Q3.
Domestic demand expanded at a weaker pace of 1.3% year-on-year in Q4 compared to 2.1% in Q3. The moderation was spearheaded by a sharp slowdown in the annual growth of private consumption, from 2.5% in Q3 to 0.9% in Q4. This can in part be explained by a pick-up in inflation during the quarter compared to Q3, which ate into consumers’ purchasing power and spurred a reduction in household spending. Meanwhile, government consumption grew at a solid but marginally more moderate pace (Q4: +4.2% yoy; Q3: +4.4% yoy). By contrast, year-on-year growth in fixed investment was stable at 0.3%.
In the external sector, exports contracted 3.8% year-on-year in the final quarter, following a 5.0% rise in the previous quarter. The drop was mainly due to reduced sales of basic metallurgic products, mineral coal and threshed coffee. Imports also contracted in the quarter, shrinking 4.0% in annual terms (Q3: +1.9% yoy). Due to the slightly sharper decline in imports, the external sector still contributed positively to economic growth, but the magnitude of the contribution was smaller than in the previous quarter.
Author: Nihad Ahmed, Economist