Colombia’s economy grew at its fastest rate in four years during the third quarter as the country demonstrates resiliency to a financial crisis in Europe and economic woes around the globe.
The government statistics department DANE said Thursday Colombian gross domestic product expanded 7.7% last quarter, its best quarterly showing since late 2007 and well above economists’ expectations. A Dow Jones Newswires survey of eight economists earlier this week saw an average forecast of 6.1% GDP growth for the quarter.
Third quarter growth was 1.7% when compared to the second quarter.
As expected, driving Colombia’s economy last quarter was crude oil production as well as construction of highways and other infrastructure after more than a year of torrential rains wiped out many roads and bridges, forcing the government to spend massively on public works.
The mining sector, which includes mainly oil but also coal and gold production, rose 18.4% in the third quarter on year. The construction sector was nearly as strong, rising 18.1% last quarter.
While the economies of many countries in Latin America and the rest of the world struggle with the effects of a global financial crisis, Colombia has remained resilient. This is due in large part to a massive inflow of foreign investment in oil and coal as the government gets a handle on efforts at ending its decades-old guerrilla war.
Production of crude oil, the Colombian government’s main source of foreign revenue, reached a record 965,000 barrels a day in November. That’s nearly double what the country was producing just five years ago.
Colombia’s economy is expected to grow between 5% and 6% for 2011.
How long Colombia’s economy can maintain its strong growth track remains to be seen. There are already some signs that economic activity, while still strong, is decelerating. Retail sales, for example, rose 6.1% in October, on the year, down from an 8.1% increase in September and 9.7% rise in August.
Capital Economics said earlier this week the third quarter growth data is “probably as good as it gets for Colombia.”
They said Colombia’s economy will probably begin to be hurt by lower commodity prices and a likely euro-zone economy in recession that could hurt the U.S., Colombia’s main trading partner. Also, they said a boom in the banking sector in Colombia appears to be coming to an end as rapid credit growth, especially to consumers, reaches its peak.