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Weak investment persists.
2024/02/15 | Andrés Pérez M., Vittorio Peretti, Carolina Monzón & Juan Robayo

Colombia’s GDP growth came below expectations in 4Q23, with investment dynamics remaining weak. The Colombian economy increased by 0.3% YoY in 4Q23 (-0.6% in 3Q23; revised down by 0.3pp). Annual growth in the quarter was below the Bloomberg market consensus and our call of +0.8%, as well as the BanRep technical staff’s forecast of +0.9%. In annual terms, the increase in annual GDP was lifted by the positive net export contribution, while broadly stable consumption and a double-digit gross fixed investment decline were key drags. For the full year, activity grew 0.6%, below the market consensus and our call of +1.0% call (also BanRep’s expectation; 7.3% in 2022) with downside revisions made to three prior quarters. Sequentially, the economy remained stable (SA) from 3Q23 to 4Q23 (+0.3% increase in 3Q23). The faster-than-expected activity slowdown may raise calls to accelerate the pace of the easing cycle given the level of monetary policy restrictiveness. However, with inflation and expectations still well above the target, along with a Board weary of upside risks this semester (El Niño, minimum wage), a cautious approach may remain the approach preferred.


Manufacturing, entertainment services, commerce, and construction contracted in 4Q23. Manufacturing contracted 4.8% YoY (-6.1% in 3Q23), while agriculture grew 6.0% (+1.8% in 3Q23), and financial and insurance services rose 5.5% (1.6% in 3Q23). Overall, natural resource sectors rose 3.7% YoY (+2.4% in 3Q23), while non-natural resource activity contracted 0.1% YoY (-0.9% previously).


Gross-fixed investment continued to fall.  Gross fixed investment contracted 14% YoY (-11% in 3Q23), pulled down by machinery and equipment, while total investment fell by 27.2% YoY. Total consumption grew 0.1% YoY (+0.6% in 3Q23), with government spending up 0.2% YoY (+2.6% YoY in 3Q23), and private consumption rising 0.1% (+0.2% in 3Q23). Exports recovered with growth of 6.6% YoY (-0.2% in 3Q23), while imports continued to fall (-12.8% YoY; -23.1% in 3Q23), suggesting the expectations of further consumption weakness ahead as interest rate and inflation remain high.


At the margin, activity increased 0.1% qoq/saar, below from the +1.4% in 3Q23.  The contraction in gross fixed investment (-15.3% qoq/saar, from the -9.4% in 3Q23) and public consumption (-14.4% qoq/saar, from -6.8% in 3Q23), was partially countered by exports growing 9.0% qoq/saar (-2.4% in 3Q23), and private consumption up 2.4% qoq/saar (-0.4% in 3Q23). The monthly coincident indicator shows that activity remained stable between November and December.


We expect 1.2% growth in 2024 this year, but risks tilt to the downside. Carry-over for this year is -0.2%. The still significantly contractionary monetary policy, a slow disinflation process and a weak domestic sentiment point to an activity that would remain well-below potential.