Colombia: Growth softens slightly in Q4 but remains upbeat
According to a preliminary estimate released by the Statistical Institute (DANE) on 14 February, the economy lost some traction in the final quarter of 2019 but concluded a robust year overall nonetheless. GDP grew 3.4% year-on-year in Q4, marginally down from Q3’s upwardly revised 3.5% expansion (previously reported: +3.3% year-on-year). Taking the year as a whole, however, the economy accelerated to 3.3% from 2.5% in 2018.
Domestic demand lost some steam in the fourth quarter, constrained by weaker fixed investment and household spending growth, although remained firm overall. Fixed investment growth decelerated to 2.5% in Q4 after expanding a revised 5.9% in Q3 (previously reported: +5.1% yoy), weighed on by sliding residential investment. In addition, private consumption growth eased to 4.4% from Q3’s 4.9% expansion, amid slightly more downbeat consumer sentiment, while public expenditure growth moderated to 4.3% from a revised 4.7% in Q3 (previously reported: +3.5% yoy).
On the external front, export growth slowed to 0.3% from Q3’s revised 2.0% expansion (previously reported: +1.9% yoy), dragged on by weak global demand. Meanwhile, import growth slumped to 5.6% from a revised 11.5% in the prior quarter (previously reported: +10.0% yoy). Taken together, the external sector weighed less severely on growth in Q4 than in the previous quarter.
In quarter-on-quarter terms, economic growth ticked down to 0.5% in the fourth quarter after accelerating 0.6% in Q3.
Looking ahead, economic growth is expected to remain solid this year, powered by fixed investment growth amid lower corporate taxes and fiscal exemptions, and still-healthy private consumption. However, social unrest and political tensions, which could hurt consumer and investor confidence, and a fairly high external debt burden pose downside risks to the outlook.
Daniela Velandia and Camilo Duran, analysts at Credicorp, noted:
“The results of economic activity in 4Q19 are a sample of what could be observed in 2020. Specifically, we expect a deceleration of domestic demand this year as the cycle of private consumption would have peaked in 2019, public spending should moderate further amid the first year of regional administrations and the fiscal constraints of the central government, and investment should moderate its growth due to the fading of the effects of the tax reform (particularly those related to capital goods purchases). However, total GDP growth should maintain a similar pace than in 2019 due to the deceleration of imports, in line with a slowing domestic demand.”