Colombia’s Economy Crashed 15.7% Last Quarter Amid Retail Slump
(Bloomberg) -- Colombia’s economy suffered its deepest crash on record as the pandemic bankrupted thousands of business from restaurants, hotels and hair salons to the national airline Avianca.
Gross domestic product slumped 15.7% in the second quarter from a year earlier, the statistics agency said Friday, led by a drop in household spending. That compares to median forecast of a 15.4% fall in a Bloomberg survey of analysts.
Across Colombia, “For Sale” and “For Rent” signs have appeared in the windows of previously flourishing businesses, and more than four million jobs have been destroyed. In wealthy neighborhoods of Bogota families of hungry Venezuelan migrants wander the streets, shouting up at apartment buildings asking for help.
Lockdown measures to curb the spread of Covid-19 have been in place since March, and the number of infections is still accelerating, raising the prospect of more hardship to come. Unemployment has soared to 20%, far exceeding that of other major economies in the region.
The retail, transport and hospitality sector contracted 34.3% from a year earlier, while construction shrank 31.7%. Only the financial sector, agriculture and real estate services escaped the crash, and registered slight growth. GDP fell 14.9% from the previous quarter.
In the second quarter, Colombia suffered relatively few infections compared to its neighbors, but the virus has rapidly spread in recent weeks. The seven-day-rolling average of deaths per million people is currently among the world’s worst according to the European Centre for Disease Prevention and Control, showing that the disease is peaking later than it did in many other places.
The Finance Ministry predicts the deepest contraction in more than a century this year, which it forecasts will swell the budget deficit to more than 8% of GDP.
The central bank has cut interest rates by 2 percentage points since March, to a record low of 2.25%. Bank governor Juan Jose Echavarria says he’s skeptical about the effect of interest rates cuts on businesses that are shut, but that this will pave the way for a faster recovery when the economy re-opens.
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