Colombia’s Economy Beats Expectations With 4.9% Growth

Colombia’s economic growth beat expectations in the fourth quarter as a surge in spending on public works projects boosted demand.

Gross domestic product expanded 4.9 percent from the year earlier, the national statistics agency said today, compared with the 4.7 percent median forecast of 31 analysts surveyed by Bloomberg. From the previous quarter, GDP grew 0.8 percent, bringing growth in the full year to 4.3 percent, from 4 percent last year.

Fourth-quarter growth was led by construction as public works projects expanded 18 percent. The better-than-expected result could bring forward the moment when the central bank starts to pare back its monetary stimulus, said Camilo Perez, chief economist at Banco de Bogota.

“The economy seems more robust than it did before, which increases the risk of an increase in interest rates, perhaps earlier than the market had anticipated,” Perez said. “The public sector was very strong in the second half of the year.”

Fourth-quarter expansion compares with 5.2 percent growth in Peru and 2.7 percent in Chile. The central bank will leave its policy rate unchanged at 3.25 percent for a 12th straight month at its March meeting tomorrow, and raise it to 3.5 percent in August, according to the bank’s most recent survey of economists.

Construction

Construction was Colombia’s best-performing sector, expanding 8.2 percent from a year earlier. Home building increased 11.5 percent, boosted by the government’s stimulus package, as subsidized housing loans helped push outstanding mortgages up 28 percent in January from a year earlier.

President Juan Manuel Santos has said repeatedly that Colombia can grow at 6.5 percent or 7 percent per year, via investments in infrastructure and if a peace deal with Marxist guerrillas brings an end to the country’s civil conflict.

Government negotiators have held talks since November with representatives of the Revolutionary Armed Forces of Colombia, or FARC, in Havana, in a bid to end a 50-year war.

Oil and mining output rose 7.7 percent, while social services expanded 6.3 percent. Manufacturing industry was the only sector that shrank, contracting 0.1 percent from a year earlier.

To contact the reporters on this story: Matthew Bristow in Bogota at mbristow5@bloomberg.net; Andrew Willis in Bogota at awillis21@bloomberg.net

To contact the editors responsible for this story: Andre Soliani at asoliani@bloomberg.net Philip Sanders, Robert Jameson

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