Colombia:  Outperforming in Q3, but mind the external sector

Colombia: Outperforming in Q3, but mind the external sector

Real GDP grew +0.6% q/q in Q3, slowing from +1.3% in Q2 and +0.9% in Q1. However, compared to last year, it grew a solid +3.3% (after +3.4% in Q2) mostly owing to internal demand. Private consumption grew +1.2% q/q (and +4.4% y/y) and investment rose +2.8% q/q (+4.8% y/y). From a sector point of view, growth was broad-based, with best performances seen in retail, finance and government services. The latter can be explained by higher public sector spending ahead of local elections in October. The tax reform currently in negotiations in Congress could also help prolong the investment cycle. Overall, the outlook remains positive for 2020, although we expect a deceleration. However, such results should not hide the fact that exports fell -1.2% q/q, while imports grew +1.9% q/q. This could widen the current account deficit which is already at a high level in Colombia (-4.2% of GDP in Q2), potentially increasing financing risks.