GDP growth loses momentum in Q1

GDP reading: According to a preliminary reading, GDP growth ebbed to 3.9% year on year in the first quarter from 4.2% in the fourth quarter of last year. That said, the reading was still well above the Latin American average. A dynamic labor market, interest rate cuts, mild price pressures, a higher anchovy catch and stronger copper output all supported economic activity in the quarter.

Broad-based expansion: Household spending growth edged down to 3.8% year-on-year in Q1 from a 4.0% expansion in Q4. Public spending, meanwhile, rebounded 6.5% in Q1 (Q4 2024: -1.4% yoy). Meanwhile, fixed investment growth accelerated to 9.2% in Q1, following the 5.3% increase logged in the previous quarter, thanks to higher public and private investment. On the external front, exports of goods and services growth sped up to 9.6% in Q1 (Q4 2024: +5.2% yoy). In addition, imports of goods and services growth picked up to 17.0% in Q1 (Q4 2024: +12.3% yoy), marking the best reading since Q3 2021.

Growth to remain robust: Our Consensus is for GDP growth to continue outpacing the Latin American average later this year.

Panelist insight: On the outlook, BBVA analysts said: “For the second quarter, we continue to estimate an expansion of around 3.5%, and for the full year, 3.1%. It is worth noting that the international environment remains uncertain, due to ongoing trade policies in major economies and their potential impacts, which pose a risk to economic activity in the coming months.” Itaú Unibanco analysts said: “The dynamics of leading indicators suggest that activity should continue to grow at a healthy pace in the near term. We still expect GDP to grow by 2.8% in 2025, supported by an investment recovery, a resilient labor market, and lower rates. However, the risk of increased domestic policy uncertainty as the presidential and legislative elections approach in April 2026, along with elevated uncertainty related to global trade may dampen private sentiment and slow the pace of activity recovery.”

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