(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here.
Colombia’s economy grew more than expected in the second quarter, as the retail, wholesale and transport sector expanded along with the financial industry.
Gross domestic product grew 3% in the three months through June compared with a year earlier, the statistics agency reported Thursday. The outcome was above the median forecast of a 2.9% increase from analysts in a Bloomberg survey. From the first quarter, GDP rose 1.4%.
The retail, wholesale and transport sector expanded 4.8% and the financial industry grew 4.6%, while manufacturing and the oil industry grew 0.6% and 1.2%, respectively. The construction sector grew 0.6% after a contraction in the first three months of the year.
Colombia is recovering slowly amid challenges including disappointing housing growth and a global slowdown that prompted the central bank to cut its 2019 GDP forecast by half a percentage point to 3%. Still, above-target consumer prices mean Colombia can’t join countries including the U.S. and Brazil which have cut borrowing costs to boost their economies.
“GDP growth data reinforces our vision that the Colombian economy is in a process of gradual recovery,” Sergio Olarte, analyst at Scotiabank Colpatria said after the release. “The discussion within the central bank board that the economy isn’t growing is over, and, if core inflation is stable, I don’t think the bank will rush to raise interest rates.”
Faster-than-expected inflation has many analysts betting on monetary tightening in the first quarter of 2020, even though economic headwinds prompted them to push back those expectations from October previously. Consumer prices have risen on higher food costs, prompting the central bank to increase its year-end inflation forecast to 3.6%.
Central bank Governor Juan Jose Echavarria has said that no monetary policy easing plans have been discussed within the board. Policy makers target annual inflation at 3%.
Furthermore, some officials such as Finance Minister Alberto Carrasquilla are more optimistic on economic prospects. He sees tax incentives driving private investments and consequently lifting growth to 3.6% this year.
That would be one of the fastest expansions among major Latin American economies, according to a Bloomberg survey.
The statistics agency also revised its first quarter GDP growth figures. It now says the economy grew by 3.1% in that period from a year earlier and by 0.8% from the previous quarter, versus previous readings of 2.8% and 0%, respectively.
(Updates with GDP revision and analyst comments.)