Colombia’s Economy Grows by 0.7% in First Quarter, Falling Short of Expectations

Colombia’s economy grew by 0.7% during the first quarter of 2024, according to the National Administrative Department of Statistics (DANE).

Financial markets had projected a growth rate above 1%, making this result disappointing.

Analysts noted that private investment, a significant growth driver, fell by 25% in 2023. Early 2024 showed only slight improvement, with a decline of 13.4%.

Public administration, defense, education, health, and social services significantly contributed to economic growth.

This sector increased by 5.3%, adding 0.7 percentage points to the annual variation. The agriculture, livestock, forestry, and fishing sectors grew by 5.5%, contributing 0.5 percentage points.

The utilities sector, including electricity, gas, water supply, and waste management, grew by 4.5%, adding 0.2 percentage points to annual growth.

Cyclone Yaku severely impacted the economy, causing floods and landslides that disrupted transportation.

This natural disaster compounded existing economic difficulties, reflecting a broader struggle for economic stability.

Mauricio Hernández-Monsalve, an economist at BBVA Research, highlighted that internal demand fell by 0.1% annually and 0.6% quarterly.

This decline marked the second consecutive quarterly decrease. He attributed this to a decrease in fixed investment and inventory depletion.

Private consumption showed mixed results. Services and non-durable goods were positive, but durable and semi-durable goods were negative.

Optimistic Growth Projection

Despite these challenges, the Central Bank of Colombia remains optimistic, projecting overall growth of 3% for the year.

The bank expects higher copper prices to support this expansion, given Colombia’s role as a major global producer.

Early indicators, such as increased electricity production and public investment, suggest improved internal demand and private consumption in April.

Inflation remains a concern, but the Central Bank aims to keep it within target ranges. BBVA Research forecasts inflation to end the year at around 2.6%, with further reductions anticipated in 2025.

Political instability, high global interest rates, and potential climate impacts add uncertainty to Colombia’s economic outlook.

Nonetheless, signs of recovery provide a cautiously optimistic view for the future. The overall sentiment is that, while challenges remain, there is potential for gradual improvement.