Colombia | Who is affected by inflation?

Summary

The headlines about high inflation in recent months reflect a scenario not experienced in the last five years in Colombia and in several decades globally, so it will continue to be a central issue for much of the year. At BBVA Research, we expect an annual variation in inflation of 8.9% in April.

Key points

• Key points:
• This reality stems from multiple sources: a strong increase in demand, at least higher and faster than in supply after Covid-19; important complications in global and local logistics chains with the famous bottlenecks and high maritime freight rates; high and volatile commodity prices.
• For the remainder of the year, after April possibly reaches the maximum record for Colombia for annual inflation, we expect a very gradual decline, concentrated in the last months of 2022, to close with an annual inflation around 7.0%.
• High inflation has a greater impact on the most vulnerable households, as they are the ones who devote most of their disposable income to basic consumption, which suggests that a price increase would imply a significant reduction in their spending capacity.
• For households with higher incomes, basic consumption is a larger proportion of their disposable income.
• In addition, there are significant risks on the horizon that could keep inflation elevated or even increase it further, such as the Ukraine-Russia conflict, contagion problems in China, and high external prices for agricultural and energy goods.

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