COLOMBIA – Transitory GDP slump in 2Q

With protest subsiding, activity concluded the quarter with a significant rebound

Vittorio Peretti & Carolina Monzón


The Colombian economy fell 2.4% between 1Q and 2Q21 as investment and exports slumped. Protests and a deadly third COVID-19 wave early in the quarter were key factors behind the weaker performance. Despite the sequential drop, GDP expanded a solid 17.6% yoy in 2Q21 (+1.1% in 1Q21), aided by base effects (15.7% fall in 2Q20). Growth came in between our call of 16.8% and the Bloomberg market consensus of 18.5%. The monthly coincident indicator shows that after monthly declines in both April and May, the quarter concluded with a significant rebound (+7.4% MoM/SA), as the economic reopening consolidated and protests subsided.

The activity recovery continues to be led by consumption. Private consumption sits 4.5% above pre-pandemic levels, while gross fixed investment is down nearly 18%. Private consumption increased 25.0% yoy in 2Q, up from 1.4% in 1Q21. Loosened mobility restrictions, fiscal stimuli and favorable financing conditions are likely key factors behind the strong consumption behavior. While sales of goods remains upbeat (rising 20.6% yoy; 3.9% in 1Q), services are recovering in line with the economic reopening (up 27.3% yoy; -0.5% in 1Q; 19.7% fall last year). Meanwhile, gross fixed investment increased 32.0% yoy in the quarter (1.7% drop in 1Q20), milder than the 39.2% drop one year before. GDP in 2Q was pulled down by a larger net-export drag as imports accelerated to 45.8% (-2.2% in 1Q21), while exports recovered to 15.4% yoy (10.2% fall in the previous quarter) as oil volumes continue to fall. 

At the margin, activity dropped 9.4% qoq/saar, the first decline since 2Q20. Key behind the fall was shrinking gross fixed investment (-55.3% qoq/saar, from +133.1% previously) and weaker exports (-14.7%, from +61.2% in 1Q21). This development is likely related to the effect of protest action. Total consumption increased 12.6% qoq/saar, similar to the pace in 1Q, while imports rose 28.6% qoq/saar (28.4% previously).

The still-favorable external momentum, significant economic reopening and expansionary policies would support a swift GDP recovery this year. We expect the Colombian economy to expand by 7.8% this year (vs. a 6.8% drop in 2020). The expectation of an swift activity recovery during 2H21, along with rising inflationary pressures and large external imbalances, favors the start of monetary stimulus withdrawal at the next central bank meeting in September (+25bps to 2.0%).

Vittorio Peretti 
Carolina Monzón