Colombia Economic Outlook. Third quarter 2022

Summary

BBVA Research estimate a Colombian economy grow stood at 6.8% YoY this year. In 2023, especially due to a moderation in private consumption, the economy will decelerate healthily to 2.0%. Inflation will close this year at 9.2% and fall to 5.0% by the end of 2023, thanks to the restrictive tone of monetary policy.

Key points

• Key points:
• Inflation remains at unusually high levels, determining an acceleration of the process of interest rate hikes and an expectation of lower growth in Colombia's main trading partners. With this, global price increases are expected to be lower in 2023.
• BBVA Research estimate that the Colombian economy will grow 6.8% annually this year. In 2023, private consumption will gradually decelerate and investment in machinery and equipment will moderate, while investment in construction will have a good dynamism. Thus, Colombia will grow by 2.0% in 2023.
• Inflationary shocks in Colombia have proven to be stronger and more persistent. Inflation will remain high this year, closing at 9.2%, and gradually moderating in 2023 to 5.0%.
• The Central Bank has already raised rates to 7.5% and will continue its upward cycle to bring the interest rate to 9.0%. These decisions are aimed at moderating economic growth to a sustainable pace in the medium term and reducing inflationary pressures.
• The dynamism of domestic demand continues to put pressure on the external imbalance in 2022. The current account will close with a deficit of 5.3% of GDP. In 2023, the slowdown in domestic demand will favor a healthy adjustment of domestic demand to 4.5% of GDP. The fiscal imbalance will remain a challenge for the coming years.

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