The expansion of Colombia’s economy has slowed significantly over the past two years, with the recently confirmed 2.0% GDP growth rate in 2016 being the lowest since 2009. Before the 1.7% growth seen in 2009, in the aftermath of the global financial crisis, the last time Colombia’s growth rate was even less than 3% was in 2002, according to the World Bank.
Figures from Colombia’s National Administrative Department of Statistics (DANE) show that the biggest cause for the slowdown was a 6.5% contraction in the oil and mining sector, which has been similarly blamed for the big fall from 2014 to 2015. Colombia’s economy remains heavily dependent on petroleum, which has historically accounted for up to two-thirds of exports, and the country has not been able to make up for plummet in crude prices since late 2014.
On the other end of the spectrum, the banking sector was the best performing industry in 2016. DANE figures show 5.0% year over year growth in the financial, insurance, business services, and real estate sector (considered one industry in official statistics). This was led by the torrid 11.0% growth in the financial services sub-sector. Construction (4.1% growth) and industrial manufacturing (3.0%) were the other strongest-performing industries.
Bancolombia, the country’s largest financial services company, also notes that a 2.0% overall growth in GDP brings some reason for optimism. It had projected a 1.8% growth rate, but the final figure was strengthened by revisions that DANE made to results from the first and second quarters of 2016, a period when agriculture and other sectors were being impacted by drought, rising inflation, and other effects of a severe El Niño weather phenomenon.
This difference hasn’t materially changed the bank’s predictions for growth in 2017, but it continues to believe that there will be a mild recovery next year. “As the current year elapses, the economy will gradually recover from the shocks that have affected growth,” wrote Bancolombia in a note to investors. “Moreover, GDP results in fourth quarter of 2016 favor our baseline scenario of expected growth for this year. We estimate that the acceleration cycle that will begin this year will extend over the next two years. Our base scenario for 2017 growth is 2.3%.”
Spurring the uptick, according to Bancolombia, will be the further advances in the nation’s sweeping infrastructure plan — its so-called 4G campaign — as well as a better overall global economic climate and improved confidence indicators within Colombia. It does note, however, that the projected recovery in 2017 could be threatened by the possibility of ongoing high inflation and the private sector’s need to adjust to the major tax reform passed by the government in December.