The Colombian economy grew by 0.23% in August 2023, according to the National Administrative Department of Statistics (DANE). These figures confirm, according to experts, the deceleration of the Colombian economy. In August 2022, the country’s economic growth was at 9.21%.
The industry, construction, commerce, and transportation sectors have faced significant challenges during this phase of economic contraction. In contrast, public spending, which includes areas such as defense, education, public administration, and healthcare, has shown more positive growth in various reports.
Decline in the Secondary Sector
Official data indicates that the primary sector (agriculture and livestock) and the tertiary sector (commerce and services) are the ones maintaining positive growth. The primary sector grew by 1.2%, and the tertiary sector by 1.7%. However, the secondary sector, which includes industrial activities and construction, has declined by 7%, accumulating six months of decreases.
So far in 2023 (January to August), the Colombian economy has recorded growth of 1.34%. Given these figures, many experts are predicting the possibility of the country entering a recession in the coming months.
The data is not favorable, especially considering that Colombian inflation, while decreasing month by month, is still in double digits at 10.99%. Most experts estimate that by December 2023, the annual Consumer Price Index (CPI) will be around 9.5%. With these figures, and in the context of global inflation, the possibilities of the Banco de la República (Colombia’s central bank) deciding to lower interest rates are more limited. These high-interest rates (13.25%) are considered by the government to be the main obstacle to economic growth in the country.
Unstable Economic Context
The global economic context is complex, and in Colombia, it is further characterized by multiple internal and external factors. Since the start of the war in Ukraine in February 2022, inflation began to rise uncontrollably, with particular severity in Colombia. Now, the potential resurgence of El Niño, with droughts and floods that could even affect electricity generation, according to more pessimistic forecasts, adds an extra level of instability.
The increase in the price of gasoline, planned and generated by the government itself with the ending fuel subsidies, also has significant implications for the cost of living. Finally, the potential impact of the current conflict in the Middle East on international oil prices, affecting Colombia’s primary export, has further complicated an already challenging outlook for the last few months of 2023.