Colombia GDP to Rise 2.6% in 2018: Latest United Nations ECLAC Study
In a new study released January 15, the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) finds that Colombia’s gross domestic product (GDP) is likely to rebound to 2.6% growth in 2018, up from 1.8% in 2017.
“GDP is projected to expand by 2.6% in 2018 against a backdrop of lower interest rates, higher oil prices and an expected improvement in the performance of the economies of the United States and the Euro area,” the latter two areas being key Colombian export markets, according to the study.
During 2017, Colombia’s domestic demand slipped, pinching GDP growth. However, “there are some indications that the slowdown may have now bottomed out and that the growth rate will have begun to pick up [since] the third quarter of 2017,” according to ECLAC.
Meanwhile, “the upturn in international mineral and oil prices [during 2017] helped to bring down the deficit on the goods account as the value of fuel exports strengthened,” the study noted.
“Foreign direct investment (FDI), although weaker than the year before, and portfolio investment were the two categories of inflows that made the biggest contributions to the financial account in the first half of 2017,” according to ECLAC.
On a related front, “gross fixed capital formation rose slightly thanks to an acceleration of investment in civil works, agricultural facilities and transport equipment. Investment in construction slumped, however. Government consumption climbed at a rate of 3.5%.
“Growth was driven by the agricultural sector –with coffee production and other crops leading the way– and by sectors associated with social, personal and financial services,” the study noted.
On the other hand, “the construction sector was hurt by weaker building demand and by contractual problems that delayed the closing of the financial packages for the 4G [fourth-generation] road infrastructure program.
“The mining sector continued to decline, although there were some faint signs of a recovery thanks to an upturn in prices,” ECLAC added.
Fedesarollo Predicts 2.4% Rise in GDP
Meanwhile, Fedesarollo — Colombia’s leading economic think-tank – on January 12 released its latest Tendencia Económica (economic trends) report, finding that national GDP is likely to grow by 2.4% this year.
Fedesarollo also noted that Wall Street bond rater Standard & Poor’s last month cut its rating on Colombia’s sovereign debt to “BBB-“, down from a prior “BBB” rating, although maintaining a “stable” outlook. “The decision by S&P highlights the fiscal challenges over the mid-term,” Fedesarollo’s report noted.
Although federal tax collections in 2017 were “weak,” Colombia’s fiscal goals were met thanks to a COP$4 trillion (US$1.4 billion) cut in government spending along with a one-time fiscal gain from massive fines imposed upon cell-phone companies accused of price-rigging, the study found.
However, such one-time gains aren’t in the cards in future years, so the government must take further steps to maintain its fiscal targets, Fedesarollo added.
Meanwhile, the most recent economic indicators show that Colombia’s full-year 2017 GDP growth likely finished at around 1.7%, while latest GDP forecasts for 2018 indicate a likely rebound to around 2.4% growth, the study noted.