Colombia Economic Outlook. March 2023

Summary

The Colombian economy will moderate its growth, from high levels of activity, mainly due to lower private consumption. GDP will grow 0.7% in 2023 and 1.8% in 2024, after a gradual recovery from the end of this year. Inflation will gradually decline, ending this year at 9% and 2024 at 5%.

Key points

• Key points:
• Globally, supply shocks have diminished, while demand has remained strong. As a result, there have been upside surprises in growth, reduced short term recession probabilities and improved headline inflation performance. Global growth is forecast to reach 2.8% in 2023 and 3.3% in 2024.
• In 2022, the Colombian economy maintained outstanding levels of activity. Not only when measured through GDP, which completed two remarkable years, growing 11% in 2021 and 7.5% in 2022, but also in labor, external and financial variables. However, since the end of 2022, some signs of slowdown began to be noticed, most evident in household spending on durable goods and the housing market. This is, in some way, desirable and sought by monetary policy to lower inflation, encourage private savings and reduce macroeconomic imbalances.
• The economy will be able to handle its slowdown due to some strengths: the labor market is now more formal, public spending will increase, global growth will remain in positive territory, the U.S. labor market remains vigorous and anticipates a good inflow of remittances to the country, and the purchasing power of households will improve given an expected gradual reduction in total and food inflation.
• The Central Bank is close to the end of its rate hiking cycle, and will then leave rates unchanged until the end of 2023, when it will begin to reduce them thanks to the gradual fall in inflation and the slower pace of growth.

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