Amidst a panorama of high prices, high interest rates and uncertainty Due to all the reforms that the Government proposes to carry out this year, the economy will go from growing 7.5 percent in 2022 to only 0.2 percent this 2023, in the most pessimistic forecast of the Bank of the Republic.
The economic slowdown and it is a fact. Although growth in the second and third quarters of last year was 12.3 and 7.8 percent, according to the National Administrative Department of Statistics (Dane)for the fourth it only increased by 2.9 percent, which shows the slowdown that the country is already having.
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This situation is not only hitting the pockets of consumers, who are increasingly reducing their consumption, but is also leading Colombian businessmen to decide to postpone their investments for this year.
This is demonstrated by a survey carried out by the National Association of Businessmen of Colombia (Andi) to its affiliates. This evidence that 27.5 percent of businessmen say that they have already postponed their investments, a figure that six months ago reached 20.6 percent.
In addition, only 27.5 percent of them responded that their investment decisions are maintained, while in the same survey carried out in August last year this figure reached 47.1 percent.
Likewise, it should be noted that six months ago, 16.9 percent of businessmen had adjusted the amount of the investment; however, currently that percentage has increased significantly to 34.9 percent, which according to the union shows the moment of high uncertainty that the country is experiencing.
“One of the fundamental conditions to guarantee the future growth of the economy is productive investment. For this reason, it is so important to be attentive to these signs and take actions to counteract the effects of a low growth scenario. We have to make a great effort to attract foreign investment, generate local investment and achieve more economic activity,” he said. Bruce Mac Master, president of Andi.
The president of Andi, Bruce Mac Master, said that there is uncertainty in the country.
biggest concerns
With 47.9 percent of the answers, what is leading businessmen to postpone their investment projects this year are the high interest rates from Banco de la República, which have been rising to 12.75 percent in order to control inflation.
According to Alejandro Reyes, BBVA Research’s chief economist for Colombia, the decision of the last meeting, which increased rates 75 basis points (bp), less than what was done in the most recent meetings, and the message from the press conference are signs that pay the ground towards the end of the issuer’s rate hike cycle.
“Although they do not end the cycle, they are unequivocal signs that they are close to their rate terminal, which at BBVA Research we estimate at 13 percent (with an increase of 25 bp in the March meeting),” said the economist .
The main concerns for businessmen are followed by political, economic and legal uncertainty in the country, with 31.3, 20.8 and 15.6 percent, respectively, of the answers.
“There is uncertainty around the reforms that are currently being analyzed and the government’s announcements about the regulation,” said the president of Andi.
Other factors that are driving businessmen to stop their investments are the volatility of the exchange rate (14.6 percent) and high inflation (12.5 percent). Although to a lesser extent, other reasons also appear, such as cash flow (3.1 percent), country cost (2.1 percent), the increase in the amount of investments (2.1 percent) and the ability to pay (1 percent).
Impact on companies
In this panorama of economic slowdown and uncertainty, the Me too He also asked his affiliates how this situation is emerging from their financial statements and, in general, what is the impact on the companies.
70.9 percent of the businessmen stated that they have presented an increase in the cost of debt that has affected their financial statements and, by far, 20.9 percent of them stated that they have had to postpone, modify or discard the investment plans they have since their financing has become increasingly complicated by high interest rates.
70.9 percent of businessmen stated that they have presented an increase in the cost of debt that has affected their financial statements.
Also, 12.8 percent said that they present difficulties in the company’s cash flow and another 12.8 percent said that they have presented decreases in profits.
Other answers were: that they have had a contraction in demand (5.4 percent), the cost of working capital (2.0 percent), which has affected their competitiveness (1.4 percent) and the higher cost of imports (1.4 percent).
Necessary projects
According to the Andi survey, the decision of businessmen who have maintained their investments is attributed to projects that were started in previous years or that are necessary and relevant to the operation of the business (37.5 percent).
The other reasons are: the good performance of sales that encourages them to continue with investment projects (16.3 percent), market opportunities (12.5 percent) and commitment to customers (9.6 percent). percent).
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