Colombia’s economy slowed in the fourth quarter as a steep cycle of interest rate hikes and the fastest inflation since 1999 hit internal demand, one of the main economic drivers.
(Bloomberg) — Colombia’s economy slowed in the fourth quarter as a steep cycle of interest rate hikes and the fastest inflation since 1999 hit internal demand, one of the main economic drivers.
Gross domestic product expanded 2.9% from the previous year and 0.7% from the prior quarter, the statistics agency said Wednesday. Economists surveyed by Bloomberg expected year-on-year growth of 3.8% and a quarterly contraction of 0.3%. The results were affected by large revisions to first-quarter and third-quarter data.
The economy is on a slowing trajectory after the central bank raised interest rates by 11 percentage points since 2021 to combat an annual inflation rate of more than 13%. Still, more tightening is expected at the March monetary policy meeting.
“The central bank did what it wanted, which is to narrow the output gap,” said Sergio Olarte, an economist at Scotiabank Colpatria. “Policymakers can’t cut interest rates yet, but the chance that the policy rate increase is 25 basis points or even none is high,” he said before the publication.
Confidence Blow
January consumer confidence, an indicator that correlates with future consumption, fell to -28.6, much worse than the -19.8 analyst forecast, and is now at the lowest level since May 2021.
The central bank estimates gross domestic product will expand by just 0.2% this year as higher interest rates and rising prices hurt domestic demand and private investment eases. Urban unemployment lost momentum in December and unexpectedly jumped to 10.8%.
A slower economy and high consumer prices may be weighing on President Gustavo Petro’s popularity levels, which have fallen below 50% just as he begins a push for major reforms to labor laws and Colombia’s health and pension systems.
The peso has weakened more than 1% so far this year after a 16% fall last year.
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