Colombia growth: huffing and puffing

Colombia’s economy is still struggling to regain its momentum.

Data released Thursday showed the Andean country grew only 2.8 per cent in the first quarter this year, compared with the 5.4 per cent expansion in the same quarter last year.

Growth was mainly dragged down by the industrial sector, which contracted 4.1 per cent, as well as a drop in coal output, Colombia’s second biggest export, due to labour unrest, which led mining to expand a meager 1.4 per cent.

Although Colombia’s finance minister, Mauricio Cárdenas, had expected the country to grow 4.8 per cent this year, he was forced to revise that figure downwards last week.

“We’ve revised the estimate to 4.5 percent, we lowered it, but 4.5 percent is a good prognosis and would be a good result for the year,” he said.

The central bank for its part is expecting the economy to expand 4.3 per cent this year. However, both estimates would be a big step down from the rip-roaring 6 per cent growth seen in 2011. As Capital Economics wrote in a note on Thursday:

The upshot is that the economy is likely to remain weak by past standards. The days of 5% annual growth are over, and the consensus forecast for growth of 4% this year looks too optimistic. We expect the economy to expand by around 3%.

However, despite the disappointing Q1 growth data, many in Colombia still believe the economy will pick up steam again later this year.

Alejandro Reyes with Ultrabursátiles, a Bogotá-based brokerage, thinks the second quarter is already “showing some signs of recovery, and consumption will play a role in this.”

For its part, the government is partly basing its growth expectations on a $2.7bn stimulus programme put in place in April, and a 7 per cent drop in the peso since January. The latter should give a boost to Colombia’s exports.



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