Colombia | 2023: From Modest Beginnings to Subdued Endings

The Colombian economy expanded by 0.6% in 2023. The deceleration accentuated in the second half. Domestic demand contracted by 3.8%, weighed down by a decline in investment and the modest increase in private consumption. The external sector propelled the GDP, aided by a reduction in imports and the resilience of exports.

Key points

• Key points:
• In 2023, investment experienced a decline across its key components, serving as the primary drag on overall outcomes. The machinery and equipment sector witnessed a decrease of 16.2%, housing investment declined by 1.2%, and civil and non-residential construction dropped by 4.9%.
• Private consumption exhibited modest growth at 1.1%. Households gradually transitioned from the spending euphoria of 2021 and 2022 to a more cautious approach to purchasing in 2023, contributing to increased savings accumulation within families.
• Sector-wise, those related to services (entertainment, tourism, restaurants, real estate) outperformed branches connected to the production, trade, and transportation of goods (industry, construction, trade, transportation). An exception to this trend was observed in agriculture and mining, which, despite being associated with primary goods, demonstrated growth throughout the year.
• In the fourth quarter of 2023, the economy expanded by a mere 0.3% YoY (0.04% QoQ). The substantial deterioration in domestic demand (-4.1%), attributed to a 14.0% decline in investment and nearly stagnant consumption (0.1%), was the primary driver of this performance. Exports emerged as the most positive component, growing by 6.6% YoY, driven by a robust surge in tourism (13.6%).
• BBVA Research anticipates that the growth in 2024 will also occur at two different speeds, akin to 2023. However, the key distinction lies in the trajectory, with this year expected to transition from less to more. The first half will resemble the conclusion of 2023, particularly in the realms of consumption and private investment. The second half, buoyed by improved financial conditions in the economy fostering confidence, is anticipated to witness a more robust recovery.

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