Colombia Economic Outlook. First quarter 2022

Summary

The Colombian economy will grow 4.0% in 2022 and 2.8% in 2023, with inflation pressures that will gradually moderate from the second half of this year. The monetary policy intervention rate will turn contractionary in mid-2022. The great challenge for the economy is to increase formal employment and generate more savings.

Key points

• Key points:
• In 2022 and 2023, the recovery process continues but, as expected, at a more gradual pace. We expect that consumption will lose momentum and that investment in construction, both housing and civil works, will partially compensate for this.
• Employment will remain the big challenge in 2022-2023. Recent data show that its performance continues to lag far behind activity and that more than one million jobs have yet to be recovered from those we had before the pandemic.
• Inflation will remain high in the first part of the year and we expect it to peak in the first quarter of 2022, before gradually easing. Thus, it will close this year at 4.8% and next year at 3.6%.
• The central bank will continue its process of raising the intervention rate to a contractionary stance by mid-2022 and leave it at that level until at least the end of 2023. We expect the rate to reach 5.75%.
• The new government and its agenda must focus on the country's structural challenges, not only on short-term needs, in order to seek sustainable growth in the medium and long term.

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