Colombia: GDP growth beats market expectations in Q2; posts strongest expansion in at least 15 years
Preliminary national accounts data showed the economy gained momentum in the second quarter of 2021. GDP expanded 17.6% in annual terms—the strongest growth rate since at least Q1 2006—accelerating from Q1’s 1.1% increase. While the result was flattered by a low base effect—Q2 2020 marked the sharpest GDP contraction—it significantly overshot market analysts’ expectations of a 14.5% expansion. Moreover, high commodity prices, the easing of some restrictions and favorable interest rates all contributed to the reading. Meanwhile, on a seasonally-adjusted quarter-on-quarter basis, GDP dropped back to a contraction in the quarter (Q2: -2.4% s.a. qoq; Q1: +2.9% s.a. qoq), suggesting underlying momentum weakened.
Domestically, the annual improvement was broad-based: Fixed investment swung to a marked 32.0% expansion in the second quarter from Q1’s mild 1.7% contraction. Moreover, private consumption growth accelerated to 25.0% in Q2 from 1.4% in the prior quarter, likely bolstered by a decreasing unemployment rate (Q2: 15.0%; Q1: 15.8%). Lastly, government spending growth gained steam, accelerating to 9.9% in Q2 from 4.5% in the first quarter.
On the external front, exports of goods and services bounced back to growth, clocking in at 15.4% in year-on-year terms following the prior quarter’s 10.2% decline. This hinted at recovering foreign demand dynamics as restrictions abroad were lifted, while higher commodity prices further supported exports. Meanwhile, imports of goods and services rebounded robustly, logging a 45.8% annual increase, contrasting Q1’s 2.3% decline and highlighting stronger domestic demand.
Looking ahead, the economy will likely continue to grow in the third quarter, albeit at a more moderate pace. The low base effect will start to fade as GDP contracted at a less pronounced rate in Q3 2020, and the monetary policy stance will likely be tightened soon, with some of our panelists penciling in a rate hike in Q3.