Colombia: Growth accelerates in the second quarter
August 22, 2018
According to the latest GDP data released by the National Statistical Institute (DANE) on 22 August, the economy accelerated on the back of a rebound in fixed investment and a pick up in private consumption. In annual terms, GDP expanded 2.8% in the second quarter, up from 2.2% in the first quarter.
Looking at a breakdown of the components, domestic demand accelerated to 2.5% in the second quarter, up from 1.5% in the first quarter. Private consumption rose 2.7% in Q2 amid a jump in consumer confidence to the highest level in a year, which followed a 2.0% expansion in Q1. Meanwhile, fixed investment rebounded, growing 1.7% in Q2 following a 0.7% contraction in Q1. A recovery in the output of machinery and equipment, and cultivated biological resources drove the upturn in fixed investment. Government spending, on the other hand, expanded at a slightly slower pace of 5.6%, down from 6.0% in the first quarter.
While exports rebounded in the second quarter, the external sector dragged on growth in Q2 as imports accelerated more sharply. Exports rose 3.0% in Q2 after a 0.7% drop in the previous quarter. Meanwhile, imports climbed 5.5%, contrasting a 1.4% contraction in Q1. Thus, the overall contribution of the external sector to growth was negative in the second quarter, following a positive reading in the first quarter.
In seasonally-adjusted, quarter-on-quarter terms, however, economic growth lost pace, declining from 0.9% in Q2 to 0.6% in Q1, owing to a cutback in government consumption compared to the previous quarter which was partly offset by a strong recovery in fixed investment. While the recovery in economic activity is seen picking up in the coming quarters, thanks to improving domestic demand and higher projected global oil prices, a high fiscal deficit continues to pose risks to long-term fiscal sustainability.
Author: Nihad Ahmed, Economist