Colombia | The economic slowdown has been accentuated, but what's next?

Summary

In the second quarter of 2023, the colombian GDP grew 0.3% YoY. Domestic demand decelerated sharply, mostly explained by investment, which implied a double-digit drop in total imports. For 2023, BBVA Research maintains the GDP growth forecast at 1.2%.

Key points

• Key points:
• Private consumption grew slightly (0.7% YoY), driven by spending on services, and maintained the moderation it has been showing for several quarters. In addition, the growth of public consumption (2.5%) returned to positive after three negative quarters.
• The economic sectors most associated with services showed the best performance. On the contrary, activities related to the production and trade of goods (except mining) showed declines. Within the services sector, the public administration, education and health sectors stood out.
• As for future expectations, the most recent and most frequent economic activity data gave mixed signals, which are coupled with the discordance extracted from the GDP release. On the negative side is the weak performance of domestic demand and, on the positive side, the strong inventory deaccumulation that may induce productive sectors to increase the pace of activity to recompose lost inventories.
• On the other hand, the economic tracking indicator —ISE— showed a trajectory from less to more during the second quarter, being driven by the public administration, education and health and electricity, gas and water sectors. However, other indicators published as of July are less optimistic: housing and vehicle sales, consumer confidence and credit portfolio.
• Given the above, in the absence of strong indicators showing a clear economic recovery, BBVA Research maintains its forecast of 1.2% GDP growth in 2023, which will imply a significant moderation with respect to last year's 7.3% expansion.

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