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Banco Mizuho on February Economic Activity Data

COLOMBIA
BulletEM BulletEmerging Markets
  • Colombia ́s economic activity index rebounded a more than expected 1.6% M/m in February, following a 2.7% M/m decline in January. Despite the erratic performance of the economy over the past year, GDP has remained on an upward trend.
  • Compared to pre-pandemic levels, the index is now 5.9% higher, the second-best performance in Latin America. In the quarter through February, the GDP proxy increased 1.9% Q/q, slowing from a 3.1% Q/q gain in the fourth quarter. The data breakdown suggests that the bulk of the cyclical recovery from the reopening of the economy is now behind us.
  • Indeed, the commerce, restaurants, and hotels category fell 0.3% M/m in February after remaining stagnant in the prior month.
  • But the country ́s large current account deficit (5.1% of GDP as of 4Q) suggests that domestic demand is overheating, requiring tighter monetary and fiscal policies to curb inflation.
  • Mizuho expect the recent surge in crude oil prices to help control the current account deficit and reduce the Colombian peso’s vulnerability to changes in global sentiment. However, the economic policy still has to change.
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  • Colombia ́s economic activity index rebounded a more than expected 1.6% M/m in February, following a 2.7% M/m decline in January. Despite the erratic performance of the economy over the past year, GDP has remained on an upward trend.
  • Compared to pre-pandemic levels, the index is now 5.9% higher, the second-best performance in Latin America. In the quarter through February, the GDP proxy increased 1.9% Q/q, slowing from a 3.1% Q/q gain in the fourth quarter. The data breakdown suggests that the bulk of the cyclical recovery from the reopening of the economy is now behind us.
  • Indeed, the commerce, restaurants, and hotels category fell 0.3% M/m in February after remaining stagnant in the prior month.
  • But the country ́s large current account deficit (5.1% of GDP as of 4Q) suggests that domestic demand is overheating, requiring tighter monetary and fiscal policies to curb inflation.
  • Mizuho expect the recent surge in crude oil prices to help control the current account deficit and reduce the Colombian peso’s vulnerability to changes in global sentiment. However, the economic policy still has to change.