Colombia: GDP growth slows in Q3 year on year on tougher base effect
Economic growth moderated in the third quarter, with GDP increasing 7.1% on an annual basis (Q2: +12.6% year on year). The slowdown in annual growth was mainly driven by a base effect. In fact, on a seasonally adjusted quarter-on-quarter basis, economic growth picked up to 1.6% in Q3, compared to the previous quarter’s 1.3% increase. Q3’s reading marked the best result since Q4 2021. Both the year-on-year and quarter-on-quarter prints exceeded market expectations.
Private consumption growth fell to 7.8% in Q3, marking the weakest expansion since Q1 2021 (Q2: +14.9% yoy). Government consumption growth waned to 1.3% in Q3 (Q2: +3.8% yoy). Meanwhile, fixed investment growth accelerated to 16.1% in Q3, above the 9.8% expansion in the prior quarter.
On the external front, exports of goods and services growth fell to 14.4% in Q3, marking the worst result since Q1 2021 (Q2: +30.3% yoy). In addition, imports of goods and services growth softened to 23.2% in Q3 (Q2: +28.8% yoy).
Our panelists expect GDP growth to sharply ease in both yoy and qoq s.a. terms in Q4. A mix of political uncertainty plus peaking inflation and interest rates will hit domestic demand, while a slowing global economy is expected to drag on export growth.
Analysts at Scotiabank Colpatria commented:
“Looking forward, while the expectation has been for consumption to slow to more sustainable levels, there have been some mixed signals, as indicators such as retail sales remain strong. That said, our growth expectation for 2022 is 7.6% but with some upward bias if we continue to see similar dynamics in consumption, which may be explained by the good performance of remittances.”
While analysts at Credicorp commented on the longer-term outlook:
“Taken together, factors such as the demanding base of comparison, the recent deterioration in the expectations of both consumers and businessmen, the marked depreciation of the COP and the combined effect of high levels of inflation and increases in the monetary policy rate should accentuate the slowdown in economic activity next year. Therefore, we have adjusted downward our expectation of economic growth in Colombia for 2023 from 2% to 1.3%.”