2024-02-16 21:03:08
The construction, industry and commerce sectors faced decreases in 2023, contributing to a result below market expectations. Although GDP grew by 0.6%, avoiding recession in Colombia, these three sectors closed with declines, affecting national economic activity.
Diario del Huila, Economy
The National Administrative Department of Statistics (Dane), revealed that the Colombian economy faced a challenging 2023 by registering GDP growth of 0.6%, marking its slowest pace in the last two decades. Although it managed to avoid a recession after the worrying 0.6% drop in November (revised downward from 0.3%), the annual performance fell significantly below market expectations, which anticipated an increase of 1.05 %.
The hardest hit areas driving this slowdown were construction, manufacturing industries and trade, all recording significant declines. In contrast, sectors such as financial activities, artistic activities, and public administration and defense were the pillars that supported the economy and prevented it from falling into negative territory.
The downward revision of last year’s quarterly figures also sheds light on the situation. The third quarter saw a reduction from -0.3% to -0.6%, while the previous two quarters saw similar cuts, declining from 3% to 2.9% in the first quarter and from 0.4% to 0 .1% in the second.
Piedad Urdinola, director of DANEattributed the decline in manufacturing industries to weak automobile sales, influenced by high interest rates from the Bank of the Republic and rising gasoline prices, which discouraged consumers from purchasing vehicles.
In monetary terms, the Gross Domestic Product reached $1,572 trillion last year, which represents growth compared to $1,468 trillion in 2022 and $1,192 trillion in 2021.
Although the economic outlook is not as bleak as initially feared, these results highlight the challenges Colombia faces in achieving sustainable and robust growth in the near future. Analysts will be attentive to the policies and measures that will be implemented to stimulate economic activity and strengthen resilience against possible setbacks.
The analysis
Construction experienced a decrease of 4.2%, with a negative contribution of -0.2 points to the total annual result. In the last quarter, the sector suffered a drop of 1.6%. According to Juan Camilo Pardo, economist at Corficolombiana, this contraction is mainly due to poor performance in civil works, with a decrease of 12.3% in 2023, attributed to poor execution in public works and the slowdown in concessions. Pardo also highlighted that costs in this sector continue to increase above the average of the last decade, while interest rates have had a significant impact.
As for the manufacturing industry, it registered a fall of 3.5% in the year, contributing -0.4 points to the annual result, and fell 4.8% in the fourth quarter. Factors such as industrial confidence and interest rates influenced this performance, according to Pardo, who also highlighted the interdependence of this sector with commerce, which also experienced a contraction of 2.8% in 2023 and a fall of 2.8%. 3% in the last quarter, influenced by the context of high interest rates.
Pardo highlighted that trade in semi-durable and durable goods presented continuous declines throughout 2023, impacted by private household consumption. These three sectors worry the economy, according to David Cubides, director of Economic Research at Alianza Valores, who anticipates that this situation will likely persist in the first half of 2024.
In contrast, government spending was the main driver of the economy, contributing 0.60 points and experiencing growth of 3.9%. They were followed by financial and insurance activities, with an increase of 7.9% in 2023 and a contribution of 0.3 points, as well as artistic and entertainment activities, which registered a positive rate of 7% and a contribution of 0 ,2 points.
Jonathan Malagon Gonzalez, president of Asobank, highlighted that the modest economic growth of 0.3% in the fourth quarter indicates a continuous adaptation of productive activity, although it removes fears of a technical recession. However, he noted that the 0.6% growth in 2023 was below the historical average, which demands greater efforts to consolidate the economic recovery in the coming months.
Carolina Soto, economist and former co-director of the Bank of the Republicurged the implementation of reactivation policies, given the stagnant Colombian economy in 2023, with GDP growth of just 0.6%, even lower than analysts’ expectations.
José Manuel Restrepo Abondano, former Minister of Financeagreed on the need for a reactivation plan, while the executive director of Fedesarrollo, Luis Fernando Mejía, warned about stagflation and the importance of certainty in the rules of the game and fiscal prudence to overcome this imbalance.
For its part, José Antonio Ocampo, former Minister of Agricultureunderlined the urgency of measures such as reducing interest rates and a more ambitious policy of non-traditional exports to stimulate economic growth.
Overall, 2023 GDP was $1,572 trillion, representing growth compared to $1,468 trillion in 2022 and $1,192 trillion in 2021.