GDP grows at softest pace since Q1 2021 in the fourth quarter
GDP growth moderated to 2.9% year on year in the fourth quarter from 7.7% in the third quarter. Q4’s reading marked the softest expansion since Q1 2021. In addition to releasing the Q4 print, the statistical office also revised down GDP figures for Q1–Q3.
The downturn was broad-based, with private consumption, public spending, fixed investment and exports all weakening. Household spending increased 4.3% in the fourth quarter, which was below the third quarter’s 9.6% expansion. Government consumption slid 4.8% in Q4 (Q3: +0.1% yoy). Meanwhile, fixed investment growth moderated to 10.3% in Q4, from 16.6% recorded in the prior quarter.
On the external front, exports of goods and services growth fell to 1.6% in Q4, marking the worst result since Q1 2021 (Q3: +14.9% yoy). In addition, imports of goods and services growth waned to 10.1% in Q4 (Q3: +24.2% yoy).
On a seasonally adjusted quarter-on-quarter basis, economic growth picked up to 0.7% in Q4, following the previous quarter’s 0.5% expansion.
The year-on-year print undershot market expectations. Surging inflation and interest rates hurt consumer spending, while a flagging global economy hurt export growth. In Q1, inflation will likely remain elevated, while interest rates will continue to rise, leading to a further slowdown in growth. That said, the downwards revision to GDP figures for Q1–Q3 suggests that the economy is performing more poorly than originally thought and may deter the Central Bank from raising interest rates much further.
Analysts at Scotiabank Colpatria commented:
“A more moderate than expected economic activity in 2022 and stickier inflationary pressures for this year, added to inflation expectations that remain well above the central bank’s target, configure a challenging scenario for Banrep’s discussion. However, weaker economic data can tilt Banrep to the dovish side. For now, our expectation is that at the March 31 meeting Banrep will raise the rate by 25 bps to 13% and keep it for an extended period of time.”
Analysts at Goldman Sachs said:
“Real GDP growth continues to decelerate from the exuberant 2021-2022 prints. There is growing evidence that private consumption, the main driver of activity, is slowing down (particularly of goods). Moreover, the shift of the growth engine towards a slowly recovering investment may be affected by heightened policy uncertainty. Going forward, we expect economic activity to moderate as high inflation, rising interest rates, tighter financial conditions, and policy uncertainty due to ambitious policy reforms already approved and the expectation of additional government proposals bear on activity.”
Colombia Government Consumption (ann. var. %) Data
|Government Consumption (ann. var. %)||3.6||7.4||5.3||-0.8||9.8|