After Colombian industrial production and retail sales posted a large
decline in February, some analysts consider the economy to already
be in recession.
Industrial production, excluding coffee-processing, contracted 13%
in February from the same month last year, while retail sales fell 4.1%
in February from the same month in 2008, according to official data
released Monday.
“With today’s terrible data, I now believe the economy contracted
3% in the first quarter of the year,” said Julian Cardenas, head of
research at local brokerage Corredores Asociados. Cardenas had previously predicted the economy would contract 0.6% in the first quarter of the
year.
The Colombian economy fell 0.7% in the fourth quarter of last year
from the same period a year ago, and a contraction in the first quarter
of the year will confirm that the economy is in recession.
The economy grew 2.5% last year, substantially lower than the 7.5% reported in 2007.
Colombia’s Finance Minister, Oscar Ivan Zuluaga, said industrial
production and retail sales accounts for 30% of the country’s gross
domestic product. “We have to wait to see what happens to the remaining
70%,” he said from the sidelines of a press conference Monday.
Diego Camacho, head of research at local brokerage Acciones de
Colombia, said the remaining sectors that account for the 70% of the
country’s GDP growth are not performing well.
“Construction is performing terribly badly. The same is occurring
with the transportation sector. I don’t see the remaining sectors
offsetting the drop of the economy,” he added.
Camacho, who initially expected the economy to grow in the first
quarter of the year by 1%, revised his estimate to a 0.5% drop for the
first quarter after the release of Monday’s economic data.
The disappointing data will also force the central bank to cut
rates by 100 basis points on April 30 when it meets, for a new rate of
6%, analysts said.
The central bank has cut rates by 300 basis points since December,
as the economy shifted from an overheating economy to a slumping one.
“I initially expected the central bank to cut rates by 50 basis
points in late April but with today’s poor data the central bank will
have no other option than to cut rates by 100 basis points,” Camacho
added.
Industrial production shrank, dragged down by production of
vehicles, which fell 50.8% in February from the same month last year,
followed by the printing industry, which contracted 37.9%.
Since August of last year, industrial production has been contracting.
Industrial production was hit by the Venezuelan decision to freeze
imports of Colombian cars for the first quarter of the year. (Dow Jones)
However, Venezuelan President Hugo Chavez Tuesday said he will
grant permits for Colombian car producers to sell 5,000 public
transportation vehicles and 5,000 heavy cargo trucks.
The Venezuelan 2009 import quota for Colombian vehicles is
substantially lower than the 22,500 and 45,000 quotas granted in 2008
and 2007.
Industrial production in the first two months of the year fell 11.6% from the same period in 2008, DANE said.