Colombia Economic Outlook. October 2023

Summary

The Colombian economy will grow 1.2% in 2023 and 1.5% in 2024. The recovery will start slowly from the first part of 2024, driven by the improved performance of private consumption. Inflation is expected to show a gradual reduction path that will allow the intervention rate to come down from December 2023.

Key points

• Key points:
• Global growth will slow from the 3.5% seen in 2022 to 2.9% in 2023 and 3.0% in 2024. Global inflation will remain high, above central banks' targets, but is likely to continue trending downward. The Fed will start cutting its rate in mid-2024, while the ECB will do so in December 2024.
• Throughout 2023, the Colombian economy deepened the deceleration process that began in mid-2022. The expected improvement in the financial conditions of the economy will allow for a gradual recovery of consumption and investment, which will translate into a better performance of retail and wholesales and industry from the beginning of 2024.
• Inflation is on a downward path, both in its food and core (non-food) components of the CPI basket. By the end of the year, inflation is expected to reach 9.7% and to continue reducing during 2024 to 5.4% in December. With this, Banco de la República will start reducing its benchmark rate starting in December of this year, to 12.50%, and 7.0% at the end of 2024.
• The exchange rate will have a devaluation trend from the end of this year, which will continue throughout 2024. This as a consequence of the still high macroeconomic imbalances, despite their moderation, and of the reduction in the interest rate differential with respect to the United States.
• In order to have a more successful recovery of the Colombian economy, which is key for the country's social indicators to improve at a faster pace, it is necessary to strengthen private investment, a better execution of public investment and the use of countercyclical sectors.

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