The public sector has been crucial for the rebound of the economy. But it is time for the private sector to take the reins of growth. When the Dane published the economic growth data in 2018, it astonished the Colombians by changing the growth figure of 2017, which fell from a now shy 1.8% to a worrying 1.4%. The revision came from the mining and financial sectors that implied, in GDP by demand, a significant reduction in fixed investment.
While making these kinds of adjustments in the calculations is normal, but not usual, the jump was very relevant and changed the growth base for 2018. That made the atmosphere even more difficult after President Iván Duque, in a few weeks ago, revealed that in the period October-December 2018 the economy would have grown 3.4%, which changed the levels of expectation of the market. In fact, many wonders if there are faults in the Dane. Others, like the economist Salomón Kalmanovitz, asked that the entity had the same autonomy as the Bank of the Republic.
Finally, by 2018 the economy grew 2.7%. Some signs were very favorable in the results, such as public administration -with 4.1 %- and trade (3.1%), as well as scientific and professional activities (5%), communications (3.1%), financial (3.1%) and public services (2.7%), which grew above the average. They also ended up in positive territory, but below the average, the manufacturing industry -with 2% and showing a change in trend-, the agricultural sector (2%), real estate (2%) and artistic activities (1.4%). Construction grew slightly (0.3%), but with an interesting last quarter when it advanced 4.4%. Only the mining sector decreased (-0.8%).
On the demand side, the consumption of both households and the Government, which grew at a rate of 3.9% in 2018, led the largest increase in the economy. In turn, investment grew 3.5%, but with a clear upward trend, as it began the first quarter contracting (-0.9%) and ended the year at a rate of 6.7%. According to BBVA, investment was the component of GDP that accelerated most between 2017 and 2018, partly due to the more favorable statistical base effect after the revision of 2017 growth. But also, because the construction sector recovered markedly at the end of the year.
Public administration and trade boosted the recovery during the year that ended. And this produces two messages: first, that consumer confidence begins to strengthen and to boost the consumption of households.
And the second, that the public sector has become a crucial player in the behavior of GDP. The question is whether it is sustainable to grow at the expense of public spending in the midst of a fiscal squeeze. It would be expected that now, with a scenario of low interest rates and a favorable tax reform for companies, the private sector will take the reins of growth.
There are already some signs in that sense. According to calculations of the Financial Superintendence, the country had about 20 months with a real negative growth of the commercial portfolio and, now, for the first time, it is approaching a growth of 0%, which shows an upward trend. This represents a better appetite for entrepreneurs to take loans, while demand has been increasing.
For this year, on average, analysts believe that growth will be around 3.26%, while the government - more optimistic - estimates a rebound in the economy of 3.6%.
However, although there is a change in the trend, it is still not enough for the country to make leaps in its competitiveness and productivity; to advance and consolidate the diversification of its productive apparatus and its exports; as well as progress in the fight against poverty and in reducing business and labor informality. In the same way, the Government must cut spending and focus subsidies better, while advancing structural reforms such as pension and labor.
In fact, the increase in unemployment at double-digit levels (12.8% registered in January), gives a warning signal. However, some consider it an atypical month, also fueled by Venezuelan migration.
Today there are risks such as the outcome in Venezuela, the commercial tensions in the world and the concern about the current account deficit. That is why the country cannot settle for such low growth rates. There are many pending.
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