With inflation falling and interest rates becoming more flexible, The Colombian economy seems to be showing signs of emerging, at a very slow pace, from the deceleration. However, what has happened to put the country in this situation?
To explain the factors that have influenced the behavior of the national economy. Raddarin its ‘Macro Economic Outlook’ report of August 2024, explained that this is due, in large part, to public spending and the performance of the trade balance during the second quarter of the year.
“In the second quarter, public spending has been key to maintaining economic growth, adding to investment in fixed capital and imports that changed their downward trend“explains Raddar.
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Imports
Port of Cartagena Archive
According to data from the report, the Government final consumption spending had demand growth of 1.97% in this periodwell above the -0.81% registered in the first quarter of the year, but much lower than the 4.98% in the fourth quarter of 2023.
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The study center also explained that final household consumption had a rebound in its annual variationin response to the slowdown in price growth, as well as a cut in interest rates, “that could boost spending on durable goods (appliances, furniture, vehicles, etc.)“.
In this case, achieved 1.55% in the second quarter of the year; very outstanding result if compared to the previous two quarters.
The weight of final household consumption
According to Raddar, both durable and non-durable goods showed growth of more than 2%. In the case of services, these showed a slowdown in their year-on-year growth, “possibly linked to the low spending dynamics in restaurants and hotels and a possible decrease in energy demand after the end of the high temperature season“.
In total, the year-on-year growth in household final consumption was 1.55% in the second quarter, higher than the 0.46% recorded in the first quarter of the current year, according to figures from the National Administrative Department of Statistics (Dane).
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Household spending
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Spending grows, but remains below economic growth
The think tank explains that although consumption will continue to contribute to the country’s economic growth this year, it may no longer be the main driver as in previous years.
“This moderation could be due to factors such as tightening financial conditions, stabilization of employment and a slowdown in credit demand.“explains Raddar.
In fact, according to projections of Corficolombianit is expected that for this year final household consumption will be much below the 2% also projected for the interannual variation of national GDP and, by 2025, consumption is expected to remain below 2% while the interannual variation overcomes this barrier.
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