Economy

Colombia's economy rebounds in Q3, Chile as well, but not that much

Colombia's recorded an 8.7% quarter over quarter GDP rise in Q3; Chile's showed a 5.2% growth – both sustained by household consumption recovery, powered by emergency measures

Photo: REUTERS/Pablo Sanhueza
  • According to Oxford Economics, the recovery in Colombia is being pushed by household consumption and investment, which grew by 9.4% and 21.3% quarter over quarter in the country;
  • As well as in Colombia, household consumption is leading the recovery process: in July the Chilean Congress approved a new law allowing millions of people to withdraw 10% of their pensions from the private pension system. Much of that money ($17 billion) was immediately reinjected into the economy.

The economies of Colombia and Chile showed strong signs of recovery in the third quarter – the first at a faster pace than the second –, according to official numbers released on Tuesday and Wednesday, respectively. While Colombia’s recorded an 8.7% quarter over quarter GDP rise in Q3, Chile’s showed a 5.2% growth. In both cases, however, recovery is still far from pre-pandemic levels: Colombia’s national accounts registered a 9% contraction when compared to the third quarter of 2019, and Chile’s, 9.1%.

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The director of Colombian National Administrative Department Statistics (Dane, in Spanish), Juan Daniel Oviedo, told La República that, in effect, the economic reopening that took place since September reflected better dynamics in the activities of trade, transport, accommodation, and food preparation, and manufacturing industries. In September, the Economic Monitoring Indicator (ISE, in Spanish) reported an increase of 3.37% in the country activity, after a -1.12% decrease registered in August, due to the addition of lockdowns and restrictions in Bogotá, Medellín, and Barranquilla.

According to Oxford Economics, the recovery in Colombia is being pushed by household consumption and investment, which grew by 9.4% and 21.3% quarter over quarter in the country, respectively, remaining roughly 10% and 20% below last years’ quarter levels. At the same time, exports barely recouped, growing only 1.9% quarter over quarter after a double-digit decline in Q2, while imports showed a strong 13.5% rise compared to last quarter, significantly reducing the net trade cushion the economy had in Q2.

“We see balanced risks to our -7.5% full-year forecast for 2020. Expenditure-side figures showed a decent rebound, but the economy still hovers 10% below its pre-pandemic 2019 Q4 levels,” wrote the company.

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Chile shows slower signs of recovery. The world’s largest copper producer economy began to show resumption after the peak of the coronavirus outbreak in May and June. As well as in Colombia, household consumption is leading the recovery process: in July, the Chilean Congress approved a new law allowing millions of people to withdraw 10% of their pensions from the private pension system. Much of that money ($17 billion) was immediately reinjected into the economy.

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This month, the country’s lower house voted to allow Chileans to withdraw another 10% of their pension funds. The measure must be approved by the Chilean senators too, but it’s already in discussion a possible third withdrawal next year. 

According to Diario Financiero, the activities most affected by the lockdown that continued to affect productive activity in the period were personal services, construction, transportation, restaurants and hotels, and business services.