Colombia: GDP rebounds but undershoots market expectations in Q4
Economic activity bounced back, increasing 0.3% year on year in the fourth quarter, above the 0.6% contraction recorded in the third quarter. Q4’s reading marked the best result since Q1 2023 but fell short of market expectations. Consequently, GDP expanded 0.6% overall in 2023, decelerating markedly from 2022’s 7.3% rise and undershooting the Central Bank’s forecast. Barring 2020’s pandemic-induced downturn, 2023’s result was the weakest since 1999, as the Central Bank’s aggressive rate hikes took a toll on activity.
On a seasonally adjusted quarter-on-quarter basis, economic activity flatlined in Q4, slowing from the previous quarter’s 0.3% expansion.
The rebound in annual GDP chiefly reflected an upturn in exports. Domestically, private consumption growth fell to 0.1% in Q4 (Q3: +0.2% yoy), marking the weakest expansion since Q3 2020. Although average inflation was below Q3 in Q4, it was more than double the upper bound of the Central Bank’s 2.0–4.0% target band, weighing on household budgets. Similarly, public spending growth slowed to 1.5% in Q4 (Q3: +2.9% yoy). Meanwhile, fixed investment contracted 14.0% in Q4 (Q3: -10.9% yoy), marking the worst reading since Q3 2020.
Turning to the external sector, exports of goods and services rebounded, growing 7.0% year on year in the final quarter (Q3: -0.3% yoy), which marked the best reading since Q3 2022. Meanwhile, imports of goods and services declined at a slower rate of 12.8% in Q4 (Q3: -23.1% yoy).
Our Consensus is for growth to gain some steam this year, largely on a low base of comparison. Still, household consumption will pick up momentum amid milder price pressures, while public spending will also strengthen at a brisker pace. Meanwhile, in light of Q4’s underwhelming result, the Central Bank could shift gears to a more aggressive loosening cycle in order to better support the lagging economy, despite above-target inflation.