Colombia: GDP growth softens in Q3; still beats market expectations
Preliminary national accounts data showed that economic growth moderated in the third quarter. GDP expanded 13.2% in annual terms,—the second strongest growth rate since at least Q1 2006— softening from the prior quarter’s 17.6% increase. The result, which was flattered by a low base effect, still overshot market analysts’ expectations of a 12.0% expansion.
Meanwhile, on a calendar- and seasonally-adjusted quarter-on-quarter basis, GDP bounced back to growth in the third quarter (Q3: +5.7% s.a. qoq; Q2: -2.5% s.a. qoq), suggesting underlying momentum strengthened markedly.
Domestically, the annual slowdown was largely due to private consumption expanding at a more moderate pace of 20.2% (Q2: +24.9% yoy). The gradually decreasing unemployment rate (Q3: 12.9%; Q2: 15.0%) limited the slowdown in household spending growth, however. Additionally, fixed investment growth moderated to 7.5% in Q3 from 33.4% in the prior quarter. This more than offset a stronger increase in government spending, which came in at 19.1% in Q3, up from the previous quarter’s 9.9%.
On the external front, exports of goods and services increased at a faster pace of 24.0% in Q3 (Q2: +16.8% yoy). The result signaled recovering foreign demand as Covid-19 restrictions abroad were eased. Meanwhile, growth in imports of goods and services came in at 40.1% in Q3, softening from the previous quarter’s 47.4% rise. The robust reading pointed to healthy domestic demand dynamics in the quarter, despite the moderation.
Daniel Velandia and Camilo Durán, analysts at Credicorp Capital, commented on Q3’s result:
“The current account deficit kept widening in Q3 2021 and reach an eyepopping 5.1% of GDP (12-month-rolling), the highest level since Q2 16. […] This is the result of the composition of GDP growth observed since the recovery began, which has been led by total consumption amid lagging investment and exports. It also shows a structurally low savings rate in the economy, especially in the public sector.”