Colombian GDP Increased Just 0.6% in 2023: A Disappointment — but Not Shocking to Anybody

Colombia’s GDP rose by 0.3% in the fourth quarter, per the National Administrative Department of Statistics (DANE), which was slightly below the 0.4% expectation, and led to a full-year 2023 number of 0.6%. This, again, is lower than the 0.9% that was anticipated by some analysts.

Quarter-over-quarter, the main laggards were construction (-1.6%), commerce (-2.3%), and industrial manufacturing (-4.8%). There was an identical picture on a full-year basis for these sectors, as they dropped in 2023 by 4.2%, 2.8%, and 3.5%, respectively.

To the upside, the finance sector was the highlight ,with a quarter-over-quarter increase of 4.7% and year-over-year jump of 7.9%.

The numbers will be a disappointment — especially as they are so overshadowed by the 2022 reading of 7.3%.

However, they won’t be a shock to anybody.

The global economy has been struggling to shrug off inflation worries for well over a year, with respite only just arriving, and this has led to many central banks maintaining overnight rates at higher-than-ideal levels.

Colombia’s Banco de la República is no exception — and while its stubbornness in reducing rates can hardly be seen as responsible for the fourth quarter performance, the first quarter of 2024 recovery is likely to be modest. And that is in large part due to the committee’s refusal to lower rates until December.

As stated before, if you don’t believe the Ministry of Finance then you need simply listen to ANDI and Asobancaria, just two of the private sector federations that have pointed the finger at Leonardo Villar and the other central bank committee members.

We will see how 2024 develops. But there are some shoots of optimism.

January inflation was lower than expected, and the latest consumer confidence reading from Fedesarrollo was a step in the right direction. On the other hand, Camacol Colombia has also reported that home sales dropped 32.3% for the same month — although December construction licenses rose 28.5% year-over-year and were the highest for that month since 2019. Signals remain mixed overall.

Unfortunately, the central bank will be sitting on their hands this month (due to the upcoming meeting not including a rate decision) when they should be cutting rates by 50 basis points.

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