The results for the Colombian economy in its second quarter were positive. A growth of 12.6% even led to Finance Minister Jose Antonio Ocampoto raise its growth forecast for the Gross Domestic Product (GDP) from 2022 from 6.5% to 7%.
These figures, however, are accompanied by a bittersweet forecast, since the boost in economic activity this year would be explained to a greater extent by the first six months, and for the second semester, on the contrary, a significant slowdown is expected, that would even affect the figures for 2023. And the Treasury, precisely, decided cut 1.0 percentage points from next year’s estimate, from 3.2% to 2.2%.
“The Colombian economy has had a very positive behavior in what was the first semester. The data for the second quarter reflects the low statistical base that we had in 2021 in the framework of the national strike”, explained Julio César Romero, an economist at the economic research department of Corficolombiana.
The analyst explains that the quarterly speed of growth is already showing signs of slowing down, and for the second semester it is expected that the high level of interest rates and inflation will “make a dent” on household consumption, the main engine of growth.
Since Corficolombiana is expected to grow above 7%but according to Romero, this would be explained promptly by the dynamics of the first semester, while for 2023 a GDP “on the side of 2% or even lower” is expected.
Carolina Monzón, manager of economic analysis at Itaú Colombia, highlights that the most recent activity data showed “significant strength” throughout the first half, with very dynamic consumption and the recovery of investment, growing in double digits.
However, he assures, “that trend could start to moderate to the extent that we already have a significantly high level of inflation”. According to Monzón, this would affect the disposable income of households, which would impact their spending capacity. Thus, according to the economist, a third and fourth quarter could be seen with growth even below 5%.
Other experts, however, believe that there are some indicators that suggest that this slowdown in growth “It is already happening”, as Sergio Olarte, chief economist at Scotiabank Colpatria, assures.
“Several things are being seen, the first is that household consumption is growing rapidly due to savings and subsidies that still exist; However, that is not permanent, so a deceleration must come from that side.”. For this reason, the entity’s projection is 6.6% for this year, while for 2023 they estimate a GDP between 2.5% and 3%.
The reason for the slowdown
Alejandro Reyes, Lead Economist at BBVA Research for Colombia, explains that the factors behind that expected slowdown could be divided into two groups: the statisticians and then the economic ones.
In the first place, the results of the last months would have an explanation related to the fact that the Colombian economy in the second half of 2021 it presented a strong growth, with a high dynamism especially of household consumption, but also public.
“This is not easy to repeat, at least not at the speed that occurred at that time, since we were adjusting to a sector normalization that has been operating for a while now. It was from August of that year that the entire subject of services began to be reopened”, he indicates.
On the ‘cheaper’ side would be the factors that have driven GDP growth in the last 9 to 12 months: the recovery of employment, the reopening of the sector, a good income performance, an increase in additional household resources such as remittances, and very active consumer credit.
“Going forward, we believe that many of these factors are going to be diluted.Reyes concludes.
An impact on investment
Despite the fact that several market players have revised their GDP forecasts for 2022 upwards after the latest Dane report, investment prospects, as with consumption, are also cautious.
Andrés Pardo Amézquita, director of macroeconomic strategy for Latin America at XP Investment, assures that, although a couple of weeks ago it rose from 6.5% to 7.5% his prognosis, he expects a moderation in the semester.
“There was even a first slowdown in fixed investment in the second quarter in all its components (in quarterly terms, fixed investment fell 0.3% in the second quarter), possibly the result of electoral uncertainty and the first impacts of higher interest rates“, Explain.
In the second half of the year, he says, we could continue to see a slow performance of fixed investment, which also now uncertainty is added by the policies of the new government and especially that derived from the tax reform.
“I also expect a slowdown in general economic activity due to more restrictive external financial conditions, a slowdown in the world economy and a local monetary policy that is already in restrictive territory and whose tightening process has not ended”, assures the economist.
LAURA LUCIA BECERRA ELEJALDE