Colombian Growth Strengthened in Q1-2018
|Q1 Results Improve but Economy Remains Weak
Colombian real GDP increased 2.2 percent on a year-earlier basis in Q1, and 0.4 percent versus Q4-2017 (top chart). Although demand side results were not part of the release, the supply side data show a relatively strong domestic economy during the first quarter, while the external sector seemed to have remained challenged. Mining output declined 2.4 percent sequentially and by 3.6 percent on a year-over-year basis. It is clear that the construction sector, which represents about 6 to 7 percent of the economy, remains challenged in Colombia. Growth in this sector has
been negative on a year-over-year basis since the fourth quarter of 2016. The sector plunged 5.5 percent sequentially and 8.2 percent on a year-over-year basis during the first quarter of the year (middle chart). Until Q4-2017, much of the decline in this sector was due to the private construction sector, that is, residential and non-residential construction. However, in Q1-2018 public construction added to this weakness by declining 6.4 percent on a yearearlier basis, which was the first year-over-year decline since Q4-2016. Meanwhile, manufacturing output grew 1.7 percent sequentially, but remained down 1.2 percent, on a year-earlier basis (bottom chart). The yearover-year drop was the fourth consecutive decline for manufacturing activityin Colombia. This sector represents about 11 to 12 percent of the Colombianeconomy. The rest of the sectors were relatively strong during the quarter, with commerce surging 4.3 percent sequentially and 3.9 percent on a yearearlier basis. This result suggests that Colombian personal consumption expenditures were relatively strong during the first quarter of the year. Meanwhile, financial services output surged 4.1 percent sequentially nd
6.1 percent on a year-earlier basis.
Improvement in Economic Activity Should Continue
Although the Colombian economy is not surging at this time, the recent improvement in economic activity should continue during the next several quarters. The global economic backdrop remains relatively benign for Colombia’s external sector, which should improve going forward. However,
as we have argued in the past, the coming presidential elections and the monetary tightening by major central banks, especially the Federal Reserve, will remain a challenge for the Colombian economy going forward. Colombia needs to attract foreign capital to develop its mining sector, which as contracted in 15 out of the past 16 quarters, on a year-over-year basis. It is clear that the end to the guerrilla conflict has not improved the conditions of the sector, as many had anticipated it would, and capital is not flowing in as expected. Furthermore, higher global interest rates will make this process more challenging going forward. On the positive side, higher oil prices willalso likely benefit Colombia this year.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.