A few days ago it became known about the slow economic growth with which Colombia started in 2024. The Gross Domestic Product, GDP, rose 0.7% in the first quarter of the year. This is the lowest figure, for a first quarter, since the covid-19 pandemic.
For some, that result may be bad, but even The Government has said that it should be highlighted that the figure is not so far from the economic reality of Latin America.
The truth is that based on the GDP reports of the countries in the region that have been published, the average is 1.5% in the last January-March period. But still, Colombia is last in the ranking.
This conclusion is reached in light of the figures for Chile, where GDP accelerated 2.3% in the first quarter; 1.6% in Mexico and 1.4% in Peru. Data from other key markets such as Brazil, Argentina, Uruguay and Ecuador are still pending.
Juan David Robayo, Senior Economic Analyst Itaú Colombia, explained that this behavior is due to the fact that Colombia’s monetary policy still has interest rates that contract the economy by discouraging household consumption, since the disinflationary process has taken longer than in other countries.
But in addition to economic factors, there are discussions of reforms and debates on fiscal issues.. “This still challenging macroeconomic and political environment discourages investment in the country, which makes a significant rebound in activity in the short term even more difficult,” Robayo pointed out.
Slow growth
A few weeks ago, the World Bank and the International Monetary Fund agreed on their cuts to the growth projection of Latin America and the Caribbean for the end of 2024, “As an effect of the slowdown that the region has faced since 2022 and has become more noticeable in 2023, there is a cooling,” say the IMF reports.
After knowing the first quarter report, some analysts recalled that the Colombian economy did not grow below 1% since the accumulated period from January to March 2020, when GDP increased 0.6%.
Economic analysts from Grupo Bancolombia pointed out that in addition, Another macroeconomic factor of slow growth is that the investment rate as a percentage of GDP has hit historic lows and has not recovered pre-pandemic levels.. “Before the pandemic, Colombia invested $25 of every $100 of income, currently those levels barely reach $17. “This has had an impact on a structurally slower growth rate for our economy.”
International rhythm
During the week that Dane published the GDP data, Ricardo Bonilla, Minister of Finance, explained that although Colombia is among those that grow the least in the region, it is not a local effect but an international one.
“In the first quarter, seasonally adjusted GDP (without holidays, among others) was 0.9%. In the comparison between the first quarter of this year, compared to the same period in 2023, it advanced 1.1%. In its original series, the economy grew 0.7% annually,” Bonilla said.
When reviewing the data, outside of Latin America and the Caribbean, in terms of countries with a growth similar to that of Colombia in the aforementioned period, there is France, a country that grew only 1.1%, but in 2023 it only obtained 0.8%; There is also Canada, which in 2023 grew 1.8% and in the first quarter of 2024, it advanced 0.9% like Colombia; percentages that are adjusted for seasonal and calendar effects.
The contrasts of the region, then, are in notable examples such as Costa Rica, which shows rising rates; The country grew 4.8% compared to 4.2% in 2023. For its part, Mexico, a country that has one of the largest economies in Latin America, presented a moderate increase of 2.0%, less than in 2023 , where it had 3.7%. (The latter completed, since 2022, lower quarterly growth, entering a deceleration phase).
Recession ghosts
Despite the negative reactions to the results of GDP growth in the first quarter of 2024, the Colombian Government’s reading is positive, to the point that they point out that the specter of recession has already been overcome. “Every time the country is moving away from it,” said the head of the economic portfolio.
Bonilla views the balance of the country’s economy favorably, and compared the recent results with the previous quarter. And he added that, “For the third consecutive quarter, the country has a positive growth path and moved away from the specter of recession. The sectors that have most energized the economy in the last year are agriculture, electricity, public administration and cultural activities. Investment grew 2.5% in the quarter, driven essentially by gross machinery and housing construction. We recover the path of growth. And we hope that the growth projected towards 1.4%, 1.5%, can end up around 2% at the end of the year.”
Even Chile would take 50 years to reach the GDP per capita of the OECD countries
Although Chile is the country in the region with the highest annual growth in GDP, of which data has been reported, a report by Libertad y Desarrollo, LyD, estimates that it will take 50 years to reach the average income per inhabitant that presented by the countries belonging to the OECD if it maintains an annual increase of 2% in GDP; a sign that although it is the one that grows the most on a regional scale, when compared with other regions, it is not so positive. And when looking at the country’s history, it has decelerated from 5% to 2% in the last 10 years.
