Colombia: Growth eases in Q2 on softer domestic demand
August 22, 2019
Economic growth edged down to 3.0% year-on-year in the second quarter, from an upwardly revised 3.1% in the first quarter (previously reported: +2.8% year-on-year) . According to the data released by the Statistical Institute (DANE) on 22 August, the print reflected softer domestic activity and was marginally below analyst expectations.
In the second quarter, domestic demand lost stride on a marked slowdown in government consumption (Q2: +1.9% yoy; Q1: +3.3% yoy, previously reported: +2.8% yoy) amid fiscal consolidation measures. In contrast, household spending rose at the fastest pace in four-and-a-half years (Q2: +4.6% yoy; Q1: +4.5% yoy, previously reported: +4.0% yoy), buoyed by the tight labor market and upbeat consumption of durable goods. In addition, fixed investment grew at the quickest pace in four years (Q2: +4.3% yoy; Q1: +4.2% yoy, previously reported: +2.8% yoy) on higher investment in infrastructure and construction.
On the external front, growth in exports of goods and services decelerated to 3.0% in Q2, from an upwardly revised 3.9% in the previous quarter (previously reported: +3.6% yoy). Similarly, import growth also decelerated in the quarter (Q2: +8.2% yoy; Q1: +9.7% yoy, previously reported: +13.7% yoy). Taken together, the external sector dragged more severely on growth in the quarter than the previous one.
In quarter-on-quarter terms, the economy grew 1.4% in the second quarter, up from 0.8% in the first quarter.
Growth is seen gaining pace this year, primarily on the back of buoyant capital spending on infrastructure and oil-sector projects, while private consumption should also remain upbeat. That said, belt-tightening measures and weaker export growth are seen restraining momentum. Headwinds to the outlook stem from uncertainties over the pace of fiscal reform and a challenging external backdrop.
Author: Nicolás J. Aguilar, Economist