The less optimistic forecasts for Colombia’s economy have been fulfilled. According to data announced today by the National Administrative Department of Statistics (DANE), Colombia’s GDP grew by only 0.3% during the second quarter of 2023. After achieving a 3% growth in the first three months of the year, the meager figure for the months of April to June confirms the country’s economic slowdown. It’s worth noting that GDP growth during the same period last year was 12.8%.
The significant deceleration was already anticipated in the predictions of some experts in the economic sector. In this regard, the forecasts of the Bank of the Republic spoke of a GDP of 0.7%. Other banking entities even predicted lower growth: BBVA mentioned 0.6%, Banco de Bogotá 0.4%, and Bancolombia, which accurately predicted the final figure, worked with a growth of 0.3%, which has now been announced by DANE.
Among the most pessimistic forecasts were those of former Finance Minister Jose Antonio Ocampo, who stated that the growth would be 0.
Among all the sectors studied by DANE to calculate the national GDP, several have dragged down the index with significant declines between April and June. Financial activities took the hardest hit (-3%). The second sector with the largest decline was commerce (-2.9%), followed by manufacturing (-2.6%) and arts and entertainment activities (-2.2%). The list of contraction continues with scientific and technical activities (-0.8%).
On the other hand, the public administration and defense, education, and health sector led the growth (4.5%). They are followed by the supply of electricity, steam, and gas (1.2%) and mining and quarrying activities (1.1%).
Change of Cycle?
These poor GDP figures are the first negative ones. Until now, the continuous appreciation of the peso against the dollar, the unemployment figures, and the slow but steady decrease in inflation seemed to indicate a cycle of relative stabilization.
However, the high interest rates of the Bank of the Republic, which are the resource for controlling inflation, are also an added difficulty for economic activity. It’s worth remembering that, even though the rate has been frozen for two months, it’s currently at 13.25%.
For Piedad Urdinola, Director of DANE, “we were coming from some quite unusual growths for the Colombian economy.” Regarding this phenomenon, Urdinola added, “it was a rebound effect from what happened during the pandemic, and we are already behaving with expected growth rates.”
For the President of the Colombian American Chamber of Commerce (Amcham), Maria Claudia Lacouture, to avoid a recession, “an articulated shock plan between the public and private sectors is needed to reactivate key sectors such as construction and commerce.” Likewise, for Lacouture, instability in the mining sector is negatively influencing economic growth and the national economy’s deceleration.
The World Bank’s projections for Colombia in 2023 place the annual GDP for the end of this year at a rise of 1.7%. Growth would be 2% for 2024.