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Economic growth decelerated in 2001
as industry slows
In the final quarter of last year, economic activity received a small
boost as growth reached 1.6% over the same quarter in 2000, which was up
from 1.0% growth in the third quarter. On a seasonally adjusted basis
economic activity rose 0.9% in the fourth quarter over the previous
quarter, up from 0.7% in the third. Despite the moderate pick up in the
final quarter economic growth slowed notably last year to 1.6%, compared
to the 2.8% registered in 2000.
Industrial
output fell last year as guerrilla attacks hinder oil transport through
the country
The key downside force behind the slowdown last year was the industrial
sector, which experienced a 0.5% contraction. Within industry, mining
experienced the strongest drop with a 4.8% contraction, as the oil
industry was plagued by constant guerrilla attacks on the country’s second
largest oil pipeline, Caño Limón, which remained idle for extended periods
as a result of the sabotage. The state-owned Colombian Oil Company (ECOPETROL,
Empresa Colombiana de Petróleos) data show that crude oil
production dropped in every month last year and that average oil
production declined 12.4% compared to 2000. In addition, lower prices on
Colombia’s crude oil – the average price per barrel was down 14.4% in 2001
over the prior year – provided additional downside pressures on output in
value terms. Furthermore, activity in the manufacturing industry dropped
0.8%, amidst the less favourable export conditions and slumping global
demand, particularly in the United States. Boosting industry and averting
an even more pronounced decline in activity was the construction sector,
which grew 3.2%, the first year of growth since 1998. The pick up in the
labour intensive construction industry served to help lower unemployment,
which dropped from an historical high of 20.5% in January 2001 to 16.4% in
December.
Agriculture still manages to expand
despite devastating coffee prices
The strongest performing sector was agriculture, fishing and forestry,
which registered 1.5% growth in 2001. However, the reading represents a
sharp slowdown from the 6.2% growth registered in 2000. The principal
cause behind more subdued growth was the coffee industry, as coffee prices
continued decline in 2001. In fact, last year the average price per pound
for the Colombian coffee dropped to lowest levels observed since 1993 and
at US$ 0.71 was more than 30% below the average price in 2000.
Services grew last year driven by
healthy transport and communications
The services sector grew 0.9% in 2001, driven principally by a 3.1%
expansion in transport and communications and 2.1% growth in retail
commerce, restaurant and hotels. On the downside, the financial services
sector contracted 6.3%.
Growth in consumption picks up
moderately compared to last year; growth in investment drops sharply but
remains healthy
DANE has not yet released aggregate demand and supply data. Consensus
Forecast participants believe that the drop in unemployment and lower
interest rates are likely to have hiked consumption growth from 1.0% in
2000 to 1.3% in 2001. Investment grew at a far quicker 8.0% rate,
according to the Consensus. However, investment growth has come down
markedly from the 14.9% registered in 2000. This year, economic growth is
expected to receive a boost from a healthy export sector resulting from
the global demand recovery, while, domestically, improved credit
conditions and declining unemployment are likely to boost demand.
Nevertheless, the stepping up of the war against the guerrilla and
political uncertainty resulting from nationwide elections are likely to
loom heavy over both investor and consumer confidence and may curtail a
more pronounced recovery. GDP growth is estimated to pick up speed in the
second half of the year, driven by consumption growth and an investment
expansion. However, participants have revised their GDP projections
downward by 0.2 percentage points compared to last month, which may
reflect increased concern about the civil war. Panellists expect the pace
of economic activity to pick up further next year, driven by a healthy
export expansion and heightened investment, while consumption will expand
at a more moderate pace.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Colombia. For more details please click here.
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