Colombia Economic Outlook. December 2022

Summary

Global growth will continue to decelerate gradually in 2023 and recover thereafter. Colombia's GDP will follow a similar path, mainly explained by lower household spending. Inflation will be lower over the next two years, allowing for lower interest rates from the end of 2023.

Key points

• Key points:
• World GDP will grow 2.3% in 2023, after having expanded 6.3% in 2021 and 3.3% in 2022. In 2024, growth will recover to 3.3%. In the United States, inflation is showing signs of deceleration and in China it is under control; on the contrary, in the Eurozone, prices are under upward pressure mainly due to gas costs.
• The Colombian economy will grow 8.0% in 2022 and, from these high levels of activity, there will be a deceleration led by lower household consumption. Thus, GDP will grow 0.7% in 2023 and 1.8% in 2024. Domestic demand will grow, on average, below these levels in the following two years.
• Inflation grew rapidly during 2022, pressured by higher food prices at first, and then, by the effect of higher domestic demand on the price of the other goods and services. This year, inflation will close at 12.5%. Then, it will moderate due to lower external pressures and the reduction of domestic spending, to end at 7.3% in 2023 and 4.5% in 2024.
• The slower economic growth and lower inflation will allow for the upcoming end of the current contractionary monetary policy cycle and the beginning of interest rate cuts in the second half of 2023. In addition, lower domestic demand will allow for a reduction in the external deficit.
• Colombia will face major challenges in the coming years and must preserve its structural strengths to face the new downturn cycle. Its challenge will continue to be to increase long-term growth and improve the standard of living of its people. To this end, Colombia must find new sources of growth, and integrate itself into the new configuration of global production chains.

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