If it grows 7.5 percent in 2022, The Colombian economy will slow down in 2023 0.2 percent in the most pessimistic forecast of the Banco de la República and 1.3 percent among the most optimistic of the World Bank.
(Also read: The reasons for the notable slowdown in the economy in the last quarter of 2022).
Although the growth of the second and third quarters of 2022 was 12.3 and 7.8 percent, for the fourth it only increased by 2.9 percent, which shows the brake that the country is already experiencing in the midst of the high inflation and increase in interest rates that are downloaded to the pocket of consumers.
«This is a clear sign that we are facing a slowdown process, which could have an effect in both 2023 and 2024,» stressed Bruce Mac Master, president of Andi.
This slowdown is also seen on the spending side, because although household consumption grew by 9.5 percent throughout the yearin the fourth quarter it slowed down and rose 4.3 percent.
(You can read: What will the Government spend on will add the budget?).
The ones that slow down the most
The sector that has slowed down its growth the most in the last 12 months is commerce, transport and accommodation. This has lost up to 15 points, going from growing at a rate of 26.7 percent in the full year ending in January 2022 to only 11.6 percent in December.
Jaime Alberto Cabal, president of the Fenalco merchants union, is concerned about the downward trend and calls for caution when carrying out the reforms. “The prospects for merchants for this year are not encouraging. We call on the Government and Congress so that the pension, labor and health reforms are analyzed and approved with judgment and technical and economic rigor”, he says.
In total, 10 of the 12 branches measured by the Dane slowed down in the last 12 months (December 2021-December 2022).
The second largest slowdown is that presented in construction, which grew at a rate of 15.8 percent in January 2022 and fell to 6.5 percent in December. This sector began to slow down since April of last year and has not recovered. In total, it has lost 9.3 points in the last 12 months.
Behind is the manufacturing industry, which, from growing at 18 percent, gradually slowed down to 10.6 percent in the last month of the year. Its deceleration has been 7.3 points.
Agriculture closed December with a 1.7 percent drop, but since it came from a smaller growth (3 percent) its slowdown has not been pronounced, from 4.7 points
Be careful with ultra-processed foods.
What can be done?
The latest data revealed by the Dane generates greater concerns regarding the magnitude that the economic slowdown in the country could have due to high prices and interest rates. For this reason, it is important to put on the table what actions could be carried out from now on in order to reduce the slowdown.
For José Ignacio López, director of research at Corficolombiana, it is important that public policy help reduce the effect of economic inflation on the poorest households, but at the same time continue promoting the creation of formal employment and that the agenda of reforms are the result of a dialogue with the private sector and civil society so that it does not negatively affect investment projects or the country’s external financing.
“We are expecting a growth of 1 percent. On the business investment side, we also see a challenging outlook due to higher financial costs and uncertainty related to legal and regulatory changes,” he opined.
Luis Fernando Mejía, director of Fedesarrollo, points out that a good part of what is going to happen is an adjustment in aggregate demand and that public policy may play a role in avoiding a very large slowdown and a negative impact on employment.
However, he thinks that on the monetary policy side there is still no room for an inflation problem because it is high and that there is no room for government spending either in the sense that the deficit must be adjusted downwards in this year.
“Perhaps the natural candidate to be able to boost productive activity, especially in the short term, are investments in infrastructure and particularly in the construction sector. Civil works would play a key role there,” Mejía said.
The projection of Mauricio Santamaría, president of the Anif economic studies center, is that it will be highly unlikely that growth of between 1 and 1.5 percent will be exceeded this year, so the slowdown would be quite hard. Because of this, he believes that at this time Options for the government, which has been spending heavily, are limited. However, he says that what can be done is not to cause more problems for growth.
He says that the Banco de la República should continue applying a monetary policy consistent with inflation levels and that the Government should spend what it can, but taking into account that we have a large fiscal and external deficit, that is, there is not much to spend. In addition, he states that the Government should also slow down a bit the announcements on issues such as energy to guarantee investment.
«Uncertainty, in addition to reducing investment, increases the cost of debt, depreciates the exchange rate and all of this ends up hitting inflation, the dollar and growth,» said Santamaría.
According to Sergio Olarte, chief economist at Scotiabank Colpatria, in the short term it is necessary to understand very well what is happening in this situation of inflation and high interest rates. Regarding the high exchange rate, given that foreign goods could be replaced by domestic ones. «This reinforces the idea that Colombian GDP will do better, precisely by taking advantage of prices and helping local industry,» he explains.
In the long term, he points out that the important thing is to think and plan to improve productivity, achieving greater rapprochement between cities and increasing exports, building infrastructure is very important, since this will improve productive capacity and thus improve employment and it would grow much more.
Given this situation, Camilo Pérez, director of Economic Research at Banco de Bogotá, believes that a household or an entrepreneur should try to take advantage of these higher rates with deposits, investments or savings. On the contrary, what the economic policy is looking for is to discourage excessive consumption, which is why at this time the taking of credit is very high.
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