Categoría: Economic Projections

2023 was not a good year. The economy will barely grow by 1%, inflation closed at 9.2%, and the labor market shows signs of slowing down. The year 2024 is likely to be a year we will remember more fondly. In fact, if things go well, it will be the year in which Colombia will overcome the inflationary outbreak without major social costs.

The results of the regional elections are expected to be reflected in the government’s decision on the minimum wage, which, if it ends up being closer to the employers’ demands, would be interpreted as a deradicalization of the government. However, the government is not as weak as it is believed to be since the health care reform managed to pass in Congress and the labor reform has resurfaced.

In the last quarter of 2023, a year-on-year growth of -0.3%, consistent with a growth of 1% for the whole year, and confirming the slowdown announced in previous months. On the political front, as polls indicated, there was a “punishment vote” in most of the country’s main departments and provinces. The latter is perceived as a significant blow to the government and the Historical Pact party. The effects of these electoral results have had an impact on the legislature.

Economic activity data show a significant slowdown, which has been accompanied by a sustained reduction in inflation, which could lead to interest rate cuts. This complex economic scenario strengthens the opposition, who could win in the main cities in the 29 October elections.

As the economy continues to slow, JP Morgan suggests that the Colombian stock market is too small to be considered emerging and could be reclassified as a frontier market. This may be of concern in the medium term. On the political front, the punishment vote remains the baseline scenario for the October elections.

The latest GDP data, presented by DANE, confirms the deceleration announced in previous reports. The economy grew by 0.3% annually in the second quarter of 2023 and had a quarter-on-quarter drop of 1%. On the other hand, regional electoral contests have already started, and polls suggest a punishment vote to the government.

The Colombian economy continues to show signs of cooling. The labor market shows a lower level of employment, which is to be expected after the increase in interest rates by the central bank. The trade balance also shows an improvement, mainly driven by lower imports.

The Colombian economy is finally showing signs of cooling. On the one hand, inflation decreased two months in a row and significantly. Additionally, the unemployment rate increased in April, both due to higher labor participation and lower employment. If this data is indicative of the coming months, it would confirm the entry into the cooling phase of the economy and possibly weak economic activity figures.

In the last month, the government had an important change in its cabinet since the departure of José Antonio Ocampo (Ministry of Finance), Cecilia López (Ministry of Agriculture), and Carolina Corcho (Ministry of Health), among other ministers and Carolina Corcho (Ministry of Health), among other ministers. In this way, the government cracked the government coalition. Corcho). The replacement of José Antonio Ocampo is Ricardo Bonilla, who retains certain positions of José Antonio Ocampo, and in others is even more orthodox than José Antonio Ocampo.

Colombia is facing a complex stagflation scenario. Inflation rose to 13.3% in March (y-o-y) and shows signs of remaining above double digits at least until the end of the year. Looking at the disaggregated data, we see a slowdown in food inflation. However, the other components continue to rise, which makes it very difficult for Banco de la República to contemplate a decrease in the interest rate.