After an annual GDP growth of +2.7% in 2018, Colombia’s monthly activity index grew by +2.8% in February, accelerating from +2.4% in January. The pause in the tightening cycle of the U.S. Federal Reserve has helped alleviate pressure on Colombia’s exchange rate: after depreciating -8% against the USD in 2018, the COP has appreciated +2.3% in 2019 to date. Stable inflation allows the Central Bank to maintain a low policy rate (4.25%). In this favorable environment, consumer confidence has improved, helping the recovery of consumer credit: after bottoming out in July 2018, it has accelerated again (back to +10% y/y in February). The situation is also improving for companies, albeit less remarkably: we start to see a trend reversal in industrial production. Yet, as the Venezuelan crisis lingers, it impacts Colombia’s public finances so that fiscal consolidation will be more gradual than expected. The government relaxed its deficit target to -2.7% of GDP this year from - 2.2% previously.
