Domestic demand

Domestic demand is driving Colombia's economic recovery, with GDP projected to grow by 2.0% in 2024 and up to 3.5% by 2026. Investment and consumption, particularly in durable goods, will fuel growth, while inflation and interest rates continue to decline.

Observing no clear signs of deceleration, we nowcast a quarterly GDP growth closer to 1.5% as of May. Given the current solid performance and the lagged impact of the expected tighter policies in 2H, we eliminate our previous slight downward bias and now assess the risks on our 2024 GDP growth forecast of 3.5% are balanced.

In our recently published report on prospects for the Colombian economy, we highlighted the leading role that domestic demand is set to have in the coming years. Within this role, there will be disparities between its consumption and investment components and between its private or public sources. In line with this, domestic demand will grow above GDP during 2019 and 2020.

GDP grew by 7.4% (YoY) in 1Q18 above both consensus and our expectation (7% vs. 6%). The acceleration in growth on quarterly basis was surprising (2% vs 1.7% in 4Q), mainly supported by the boost in private consumption and the recovery in investment. We forecast 2018 GDP growth to be 3.5-4.0% as we expect adjustment of the economy to become more obvious from now onwards.