Colombia: GDP rebounds in Q1, surprising on the upside
According to preliminary data, GDP grew 1.1% in annual terms in the first quarter of 2021, swinging from the 3.6% decline tallied in the prior quarter and taking market analysts by surprise.
Looking at the details of the release, Q1’s upturn was largely driven by strengthening domestic demand amid a still-downbeat external sector. Household spending bounced back in the quarter, growing 1.0% in annual terms and contrasting Q4 2020’s 1.5% decline. Moreover, government consumption increased 4.6%, matching the previous quarter’s pace. Meanwhile, fixed investment contracted for the sixth successive quarter in Q1, albeit at a significantly softer pace than in Q4 2020 (Q1: -1.6% yoy; Q4 2020: -13.6% yoy).
On the external front, exports of goods and services contracted 8.3% on an annual basis (Q4 2020: -19.4% yoy), hinting at still-subdued foreign demand. Meanwhile, imports of goods and services slid 3.9%, moderating markedly from Q4’s 13.5% dive and further highlighting the improving domestic economy.
Lastly, on a seasonally-adjusted quarter-on-quarter basis, GDP grew 2.9% in Q1, easing from Q4’s 6.1% increase, but notably surpassing market analysts’ expectations of a 0.9% expansion.
Commenting on the outlook ahead, Daniel Velandia and Camilo Durán, analysts at Credicorp Capital, said:
“This set-up, along with a stronger momentum by 2020-end, entailed upside risks to our 4.8% GDP growth projection for this year […]. Indeed, with the figures of 1Q21 we are increasing our forecast to 6.5%. Of course, short-term risks are noticeable too, given the ongoing third wave of Covid-19 contagion (the strongest one so far), the national strike sparked by the presentation of the proposed tax reform and the lingering fiscal uncertainty. […] Leading indicators of retail, private spending, and mobility have resisted somewhat the pressures from the national strike and the third wave in Apr-21 and May-21, suggesting that the slowdown of commerce (the sector with the highest share on value added and employment) will not be too dramatic in 2Q21. In any case, all will depend on how long the strike will be.”