Economic growth eases in Q2

Momentum softens: GDP growth ebbed to 3.9% year on year in the second quarter, from 4.2% in the first quarter. On a seasonally adjusted quarter-on-quarter basis, economic growth picked up to 1.2% in Q2, up from the previous quarter's 0.1% increase.

Domestic demand drives the slowdown: Household spending growth fell to 2.7% in Q2, marking the weakest expansion since Q4 2022 (Q1: +3.3% yoy). Moreover, public consumption growth moderated to 1.2% in Q2 (Q1: +2.5% yoy). Fixed investment growth waned to 0.1% in Q2, down from 4.2% in the prior quarter. On the external front, exports of goods and services increased 8.5% on an annual basis in the second quarter (Q1: +5.5% yoy), likely still reflecting some frontloading efforts ahead of greater U.S. tariffs. Lastly, imports of goods and services growth sped up to 6.0% in Q2 (Q1: +5.4% yoy).

GDP growth to moderate this year: Our Consensus is for Q3 GDP growth to hover near Q2’s level. July’s interest rate cut is likely to buttress domestic activity, but August’s U.S. tariff hike should depress exports momentum. In 2025 as a whole, the economy should expand at a milder pace compared to 2024 on slowdowns in private spending and fixed investment growth.

Panelist insight: Ricardo Gómez, economist at Oxford Economics, commented: “We’ve raised our GDP growth forecast by 0.5ppts to 3.5% for this year, although it remains 0.3ppts below the BCCR’s projection. The expansion will be driven by positive contributions from net trade, with export growth expected to reach 6.5%, mainly due to increased shipments of medical instruments. This will add to the positive contribution from domestic demand, which is set to grow by 3.1%, supported by rising real wages amid subdued inflation.”

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