Colombia: GDP drops at softer pace in Q3
November 17, 2020
According to preliminary data, GDP declined at a softer pace of 9.0% on an annual basis in Q3, following Q2’s 15.8% record-breaking drop, as the relaxation of Covid-19 measures allowed for the gradual resumption of economic activity. Q3’s result was slightly lower than market analysts’ expectations of an 8.7% drop. Looking at the details of the release, fixed investment dropped 19.5% year-on-year in Q3, falling at a less pronounced pace than Q2’s 33.5% dive, chiefly driven by a significantly softer drop in machinery and equipment investment. Moreover, private consumption declined 8.9% in annual terms, a weaker contraction than Q2’s 15.9% slump, largely reflecting softer drops in the purchase of durable and semi-durable goods. Meanwhile, government spending grew at a more moderate pace of 2.0% in the quarter (Q2: +3.0% yoy).
On the external front, exports of goods and services remained depressed, falling at a slightly softer pace of 24.1% year-on-year in Q3 (Q2: -27.5% yoy). Conversely, the decline in imports of goods and services moderated notably to 21.1% on an annual basis in Q3, following Q2’s 30.2% slide.
On a seasonally-adjusted quarter-on-quarter basis, GDP bounced back solidly and expanded 8.7% in Q3, contrasting Q2’s 16.1% drop and logging the strongest growth on record.
Commenting on the outlook ahead, Daniel Velandia and Camilo Durán, analysts at Credicorp Capital, noted: “While we expect activity to continue accelerating in the coming months, two major challenges must be faced to maintain the current pace of recovery: i) the dynamics of the pandemic, which has remained contained recently, but continues to put pressure on several sectors, and ii) the severe hit on the labor market, both in terms of magnitude and quality. […] All-in, we hold our GDP growth forecasts at -7.0% for 2020 and 4.8% for 2021, with a favorable statistical base playing a major role.”