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Growth
consolidating. According
to preliminary statistics released by the National Planning Department (DNP),
the Colombian economy is on a healthy path to recovery from last year's
historic recession. The Department's data shows that the economy
expanded 3.9% in the second quarter of this year, following the 2.2%
expansion in the first quarter. The second quarter reading compares
favourably to the 6.7% contraction experienced in the same quarter last
year. The strong GDP growth in the second quarter brought the
economic expansion in the first half to 3.0%. The DNP anticipates
the favourable growth trajectory to continue through the end of the year
with growth exceeding 3.0%.
The
DNP data also indicates that the manufacturing industry put in the
strongest performance with 11.5% year-over-year growth, up from 8.9% in
the first quarter.
The agricultural sector has shown an even more pronounced
improvement, expanding from just 1.5% in the first quarter to 5.9% in the
second quarter.
On the downside, the construction sector remained depressed,
registering a 2.2% contraction, the ninth consecutive quarterly
contraction since Q4 1997.
The continued recession in the construction sector has been caused
by both unfavourable economic conditions and uncertainty surrounding the
legality of a new national housing law.
The ongoing slump in the construction sector is likely to maintain
the unemployment high. The current level of 20.4% is the highest rate in
Latin America.
Industrial
production strong. The
most recent data release from the National Statistical Office (DANE)
confirms the improved economic performance. According to DANE,
industrial production is on a strong path to recovery from last year's
13.6% contraction. In June, industrial production expanded by 12.1%
compared to the same month last year - the highest growth rate experienced
since March 1998. Production of transport equipment expanded by
53.9% over June 1999, while growth in chemical products, textile and
clothing production grew by over 25.0%. Virtually all other sectors
also experienced sound growth, only the production of petroleum
derivatives and beverages declined by 9.0% and 8.7% respectively.
The healthy recovery of the industry continues to be driven by a
favourable external environment for Colombian exports.
Consumption
remains low. The most
recent data from DANE indicates that consumption remains sluggish.
In the first six months of the year retail sales increased just 3.7% over
June 1999. Sales of textiles and clothing and household appliances
remained strong, with growth reaching 39.7% and 20.5% respectively for the
same period, while automobile sales growth remained down at 1.9%.
Despite the moderate growth in consumption, the August survey of the
National Retailers Federation (FENALCO) indicates that business confidence
in the retail sector continued to improve in July. While in June 48%
of the retailers were optimistic that sales would improve in the next six
months, this figure had increased to 52% in July.
The
Colombian economy is showing signs of recovery driven by a strong external
sector and a healthy recovery in industry.
Consumption is also beginning to resume.
However, full recovery is likely to remain absent as long as the
current high unemployment rates fail to subside.
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