Colombia projection note OECD Economic Outlook November 2022

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Colombia GDP growth is projected to slow sharply from 8.1% in 2022 to 1.2% in 2023, and then edge up to 1.7% in 2024. Consumption and investment will remain subdued as households and firms cope with high inflation and interest rates and uncertainty about the economic outlook and economic policy. Inflation is set to exceed 10% this year but is projected to gradually return to the 2-4% target range by 2024. Monetary policy is expected to remain tight, with policy rate increases stopping once inflation stabilises, and some policy easing starting in 2024. Boosting public revenues will lower the budget deficit under current spending plans, which include a necessary increase in social expenditure. Widening social protection coverage and simplifying the corporate tax regime are needed for stronger and more inclusive growth. The economy is cooling down The economy expanded by more than 10% year-on-year during the first half of 2022, mainly driven by vigorous private consumption on the back of a strong employment recovery and consumer credit growth. The recovery of investment also picked up its pace. In September, the unemployment rate stood at 10.7%, only marginally above pre-pandemic levels. Wages in manufacturing and retail trade were up 10-11% year-on-year in August, slightly above the 10% minimum wage increase in 2022. Consumption fell in the third quarter, and consumer confidence deteriorated further in October. Annual consumer price inflation reached 12.2% in October and is becoming increasingly entrenched, with the core measure at 8.4%. Prices have risen particularly steeply for food and energy, as well as for manufactured goods. One-year ahead inflation expectations are around 7%, and two-year expectations are 4.8%. The depreciation of the peso, which declined almost 10% against the US dollar in October alone, has increased the cost of imports and inflation. Sovereign risk premia have risen significantly since 2021.

Colombia

Source: DANE; BRC; CEIC; and OECD Economic Outlook 112 database. StatLink 2 https://stat.link/ojez4y

OECD ECONOMIC OUTLOOK, VOLUME 2022 ISSUE 2: PRELIMINARY VERSION © OECD 2022


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Colombia projection note OECD Economic Outlook November 2022 by OECD - Issuu