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.