Colombia's consumer spending levels remained strong in Q1 2022, even as inflation ticked upward

After a full recovery from the pandemic in 2021, Colombia will continue to see strong growth in 2022

Colombia continued to outperform growth expectations in Q1 2022, with an 8.5% YOY expansion, driven heavily by robust consumer demand, which is being bolstered by government transfers to households and a rebounding labor market. During the remainder of 2022, clients should expect to see inflation and political uncertainty around a likely populist victory in this year’s presidential election temper growth to a greater extent. Nonetheless, economic growth will remain above pre-pandemic levels in 2022 with a GDP expansion of 4.4% YOY. However, firms should prepare for a more substantial slowing of growth in 2023 to 1.9% as Colombia will face heightened political disruptions and a tax reform, after over a year of elevated inflation weighing on consumer finances. In 2022, amid resilient consumer demand, B2B firms should continue to prioritize industries closely tied to consumer spending, including retail, manufacturing, and consumer-facing services, all of which exhibited strong growth in Q1 and are better positioned to withstand looming political risks. 


On May 16, Colombia released official GDP data for Q1 2022 showing an 8.5% YOY expansion, notably above consensus forecasts of 6.4%. Consumer demand remains a fundamental driver of growth, expanding 12.2% YOY despite the initial impacts of inflation from the war in Ukraine. Fixed investment also saw a notable expansion of 11% YOY, the fastest annual expansion since Q2 2021. However, overall investment remains below pre-pandemic levels as political risks and tax increases have weighed on firms’ investment appetite. At the industry level, growth was driven by sectors tied into consumer demand, with strong expansions for retail (15.3% YOY), manufacturing (11.1% YOY), and arts and entertainment (35.7% YOY).

Our View

Colombia continues to see one of Latin America’s strongest recoveries from the pandemic despite notable challenges and looming political risks. After a full 2021 recovery of GDP from the pandemic, 2022 is set to continue to deliver above average growth for Colombia, even as other countries in the region see a greater slowing of growth. Strong performance in Q1 raises our GDP forecasts to 4.4% YOY as Colombia also remains well positioned to withstand the repercussions of the war in Ukraine. However, 2023 is poised to be a challenging year for the Colombian economy and the business environment, as moderating consumer demand, deteriorated government finances, and heightened political disruptions are set to converge.

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