[Economics] Colombian economy grew 10.6%, more than expected in 2021

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The dynamism of last year was compared to a historical contraction of 7% in 2020 caused by the crisis derived from the coronavirus pandemic, reported by the National Department of Statistics (DANE).

Colombia's economy expanded by a historic 10.6% in 2021, the government revealed on Tuesday, a higher-than-expected figure driven by domestic consumption that would pressure the Central Bank to intensify the magnitude of interest rate hikes to contain inflationary pressures.

The dynamism of last year was compared to a historical contraction of 7% in 2020 caused by the crisis derived from the coronavirus pandemic, reported by the National Department of Statistics (DANE).

The market expected an expansion of the Gross Domestic Product (GDP) of 10% in 2021, according to the median of a Reuters poll, while the Central Bank projected 9.9 percent.

"This is a solid end to the year," said Andrés Abadía, chief economist for Latin America at Pantheon Macroeconomics in London.

 

Abadía agreed with other analysts that the surprising economic growth ─which only in December reached 11.8%─ would play in favor of the monetary authority speeding up the pace of interest rate increases.

"It seems that households are spending more, so it is better to normalize the interest rate faster to send the signal that prices can be adjusted as the inflation target needs it," said Sergio Olarte, chief economist for Colombia at Scotiabank. .

Until January, inflation accumulated 6.94% in years, more than double the long-term punctual goal of the Central Bank, of 3 percent.

"I think that in March they can go up quite a bit, 100 basis points is the scenario for continuity in rate hikes, but with higher inflation and higher GDP, an increase of 125 or 150 basis points would not be unusual for me" Olarte assured.

The high prices led the issuing bank to step on the accelerator at its January meeting with a surprise increase of 100 basis points in its reference rate to 4% and the market expects the agency to take it to a level close to 6% before end this year.

 

The next meeting of the Central Bank will be at the end of March.

 

widespread growth
Although part of the expansion in 2021 was explained by a statistical effect when compared to the contraction of 2020, in the year artistic activities grew by 33%, commerce by 21.2%, the manufacturing industry by 16, 4%, the information and communications category 11.2% and professional and scientific activities 9.7 percent.

Other increases occurred in the agricultural sector with 2.4%, in mining with 0.4%, in public services with 5.1%, in construction with 5.7%, in financial activities with 3.4%, in real estate with 2.6% and in public administration with 6.9%, DANE revealed.

Investment grew by 9.9% during 2021, compared to a 20.5% drop in 2020.

The GDP in 2021 was equivalent to 1,176 billion Colombian pesos (298,731 million dollars), the DANE report specified.

In the fourth quarter of last year alone, the fourth largest economy in Latin America expanded by 10.8% compared to the same period in 2020.

If compared to the third quarter of the same year, the GDP grew by 4.3% between October and December, DANE specified.

According to the median of the Reuters poll, GDP growth is expected to slow to 4.1% this year - below the government's 5% target - due to high inflation, higher interest rates, less fiscal stimulus and uncertainty. for the elections to choose the successor of the president of Colombia, Iván Duque.

For 2023, the survey showed a median economic expansion of 3.3 percent.

 

Link: https://www.eleconomista.com.mx/economia/Economia-de-Colombia-crecio-10.6-mas-de-lo-esperado-en-2021--20220215-0070.html