Improvement in the economy, under observation: what is missing to confirm its recovery?

The most recent balance of national economic activity was undoubtedly an incentive amid the multiple alerts that are in force these days in the country thanks to the cash problems faced by the Ministry of Finance, the slowdown There is no respite from the reports from various productive sectors, which, although they have begun to improve, have not yet recovered all the lost ground.

Although for April it was expected that the Dane accounts would show a much more favorable dynamic than perceived, both at the end of 2023 and at the beginning of 2024, the results that left a rebound of 5.5% were well above The expectations, driven mainly by the agricultural and public sectors, which keep the ship afloat.

However, although they agree that the balance was positive, some economic study centers warn that it is not yet time to declare victory and that we must review all the factors that could have influenced the data, starting with those derived from the calendar, since apparently they had a very strong impact.

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For the Anif Economic Studies Center, if 5.5% is added 4.0% in seasonally adjusted terms, it can be said that the country achieved its best result in economic activity since October 2021, the first month after the reactivation. They also highlight that the inter-monthly variation with respect to March was 2.0%. Thus, so far in 2024, a growth of 1.9% is observed.

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“As things stand, economic activity so far this year (January to April) registers an expansion of 1.9%, compared to the 1.5% reported in 2023 for the same period of analysis. This behavior is attributed to tertiary activities that together contributed 3.6 percentage points, with an annual variation of 5.1%, followed by primary activities that contributed by 1.5 points to economic activity, as a result of its 10.2% growth,” they noted.

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With this they make it clear that the economic dynamics are improving and that industry and commerce are once again registering positive variations after months in the red, so for now they maintain their growth projections at 1.1% for 2024, although not They rule out that they can be revised upwards again.

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However, they maintain that “it is worth mentioning that the performance The month of April has an important calendar component, since Holy Week was located in April 2023, unlike 2024 (March). For this reason, the revision of the projection will depend on new information available in the coming months, which will allow us to determine if this positive behavior is maintained.”

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In its report after the data from the Economic Monitoring Index delivered by Dane, the Bancolombia Investigations team delivered what for them were the “lights and shadows” of the report, starting because thanks to that data of 5.5% In annual variation, they adjusted their GDP growth outlook from 0.6% to 1.3% for this year, as well as a rebound from 2.4% to 2.6% for 2025.

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In the “shadows”, they pointed out that despite the aforementioned rebound in economic activity, in aggregate, the economy continues to stagnate and this good performance contrasts with a drop in investment of 27% -last twelve months- and a weak evolution of leading indicators.

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“In addition, the adjustments announced in the Medium-Term Fiscal Framework (MFMP) at a good time mean an honesty of the fiscal accounts, but they represent a setback for public investment. The new fiscal deficit expected by the government of 5.6% of GDP will seek to comply with the Fiscal Rule, but will have little room for maneuver in the face of eventualities,” these experts added.

Ministry of Finance and Public Credit

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Thus, they closed making it clear that the low investment dynamics, both public and private, leads them to maintain a growth perspective that will remain at rates of less than 3% annually, below the potential for Colombia; while warning that the fiscal outlook “which is not yet fully resolved (neither for 2024 nor 2025), is beginning to put pressure on the main local financial assets, which until now have been operating with less volatility.”

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Another vision to take into account within the “cold” reviews that were made to the ISE in April was that of the rector of the EIA University and former Minister of Finance, José Manuel Restrepo, who in a message to President Petro indicated that although improvements are perceived in economic activity, there are elements of care that cannot be overlooked.

José Manuel Restrepo, rector of the EIA University

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Restrepo Abondano began by saying that it cannot be overlooked that the Industrial Production Index continues to deteriorate and that it is urgent that it begin to improve significantly to recover lost employment, especially when this sector is essential for the economic and social well-being of the country.

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“Trade has been in continuous decline for 17 months, seriously affecting employment. Furthermore, private investment has been declining for five consecutive quarters by double digits, which is an alarming sign for economic growth. This context has resulted in the worst quarter in business creation in four years, affecting entrepreneurship, crucial for growth and tax collection,” said the Rector of the EIA University.

Economic recession

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In his message, this economist also warned that domestic tourism and the gastronomic industry have also been in decline for several months, and the recovery in housing construction remains weak.

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In this sense, he added that all this contributes to tax collection goals not being met and warns that in contrast, during the economic growth of other OECD countries, there was a real improvement in employment and confidence in the productive sectors, something that is not being seen in the country.

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“The current decrease is increasing seasonally adjusted unemployment and decreasing employment, which has serious social impacts. The recent good performance of agriculture and the increase in the arrival of foreign tourists is positive, although both sectors are marred by security problems,” this expert concluded by saying, who also offered his help for the reactivation plan.

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With this it is clear that although the country had a break in April with its economic reports, There is still a lot of progress to be made and according to these analysts, the reasons for growth must be thoroughly reviewed to prevent it from becoming a flash in the pan and the country returning to negative results in May.