The National Administrative Department of Statistics (DANE) has released Colombia’s third-quarter GDP data — and while it was up 0.2% quarter-over-quarter and year-to-date growth stands at 1% — there is no getting away from both the -0.3% year-over-year reading and the dismal returns from certain sectors.
Photo: Banco de la República, the central bank of Colombia, in Bogotá. (Photo credit: Camilo Sanchez)
Although perhaps there shouldn’t be a massive surprise.
First, the numbers: Industrial (-6.2%), commercial (-3.5%), and construction (-8%) were the headline grabbers, with the situation being somewhat saved by better numbers in real estate (+1.8%), the public sector (+5.3%), and finance (+1.6%).
But perhaps the real headline grabber should be Banco de la República, which — in its infinite wisdom — has chosen to ignore the other 99% who understand that 13.25% overnight rates choke off an economy.
Yes, they are concerned about inflation. But they have clearly done enough damage and need to upgrade the November meeting to include a decision on rates — especially as October CPI was lower than expected — and get busy cutting.
The government recently stated that it still believes 1.8% growth is possible this year, noting that they were above the estimate of IFC (1.4%) and others. After seeing this quarter’s data, that now seems a pipe dream.
Colombians may already have planted the Christmas tree and started spending. But even their December largesse is unlikely to compensate for the work done already by the central bank.
The National Business Association of Colombia (ANDI), FENALCO, Asobancaria and the government are likely to have plenty to say on the subject this month. Political opponents will suggest that a lack of confidence in the administration of President Gustavo Petro is slowing investment.
But who is going to borrow and invest their hard-earned Colombian pesos at these interest rates?
Minister of Finance Ricardo Bonilla already had his say: the GDP report is bad, and the central bank should have started cutting rates in September.
Who is to argue — except the five committee members who thought they knew better?