Colombia Economic Outlook. December 2023

Summary

The Colombian economy will grow 1.5% in 2024 and 2.3% in 2025. Private consumption, in the same two years, will grow at rates of 2.2% and 3.0%, respectively. And fixed investment will move from negative (-2.0% in 2024) to positive figures (6.2% in 2025).

Key points

• Key points:
• The global economy will continue to slow as monetary conditions remain tight, fiscal policies become less expansionary, labor markets moderate and excess savings decline. The global growth will fall from 3.4% in 2022 to 3.0% in both 2023 and 2024.
• In 2023, Colombia's economic growth will stand at 1.2%. Throughout the year, the slowdown in activity consolidated and deepened, explained by the strong moderation of domestic demand.
• Declining inflation will benefit from lower domestic demand, especially for the core (non-food) component. Annual inflation is expected to end this year at 9.7%, in 2024 at 5.4% and in 2025 at 3.8%.
• The improved inflation performance will allow the Central Bank to start reducing its intervention interest rate in December, with a cut of 50 basis points. During 2024, the bank will continue to lower its interest rate, leaving it at 7% at the end of that year. The reduction in the interest rate differential with respect to the United States will partly explain upward pressures on the exchange rate, towards higher levels than the current ones during 2024 and 2025, approaching 4,450 pesos per dollar.
• In the future, Colombia's linkage to global value chains and the promotion of sectors such as agriculture will be key to boost potential growth.

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