Colombia: Economic activity records historical contraction in Q2
According to preliminary data, economic activity deteriorated significantly in the second quarter due to the impact of the coronavirus pandemic and associated containment measures. GDP plummeted 15.7% year-on-year, contrasting Q1’s 1.4% expansion and marking the worst contraction on record, which was widely in line with market expectations.
Looking at the domestic economy, fixed investment collapsed 32.2% year-on-year in Q2, significantly greater than the 4.9% drop recorded in the previous quarter. Similarly, private consumption plummeted 15.9% on an annual basis, contrasting Q1’s 3.8% increase. In both cases, the decline was the worst on record, reflecting the impact of Colombia’s Covid-19 lockdown that was imposed on 25 March and resulted in a massive shutdown of businesses and an unemployment spike in the second quarter. Restriction measures are scheduled to last until end-August, when authorities will implement a new series of targeted lockdowns, which are likely to have a further negative impact on domestic demand and weigh on the economy’s recovery ahead. Meanwhile, government spending growth inched up, coming in at 3.0% in the second quarter (Q1: +2.9% yoy).
On the external front, exports of goods and services plunged 27.4% year-on-year, as the pandemic shuttered foreign demand, with the key oil industry hit particularly hard. Similarly, imports of goods and services declined at a faster pace of 28.8% (Q1: -2.2% yoy).
On a seasonally-adjusted quarter-on-quarter basis, GDP tumbled 14.9%, falling at a much faster pace than Q1’s 2.1% contraction and marking the worst drop on record.
Commenting on the Q2 results and the outlook ahead, Daniel Velandia and Camilo Durán, analysts at Credicorp Capital, noted: “Naturally, such a collapse was widely anticipated due to the strict nationwide quarantine held in the month of Apr-20, a measure that remains in place in broad terms but has been eased since May-20 for some sectors and personal activities, while being differentiated across regions depending on the pandemic behavior. […] It is worth noting the DANE revised to the upside the 1Q20 GDP, so activity grew 1.4% y/y in that quarter instead of the 1.1% y/y reported initially. Despite this uplift, we maintain our GDP growth forecast of -7% for the whole 2020, as the recent acceleration of the pandemic means that both uncertainty and restrictions will remain in place.”