Colombia’s economy is experiencing a slowdown from 2023 and part of 2024, according to the recent Financial Stability Report published by the Bank of the Republic. This analysis indicates a decrease in inflation, the current account deficit and the fiscal deficit, as parts of an economic adjustment process.
The country’s Gross Domestic Product (GDP) showed a significant reduction in growth. During 2021 and 2022, the Colombian economy had recorded strong growth driven mainly by domestic demand.
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However, This growth moderated as excess spending was corrected and several supply shocks were diluted, which contributed to the fall in inflation. This occurred in a context of declining inflation expectations, supported by contractionary monetary policies aimed at achieving inflation of 3% in 2025 and guiding GDP towards a path of sustainable long-term growth.
Regarding credit establishments, they continued to experience negative real growth in their assets, although a slight minor contraction was observed in the period since 2024. Since May 2023, both the portfolio and investments of these establishments have shown real contractions, which reflected a lower willingness to take risks on the part of financial entities. However, since the beginning of this year, a decrease in the contraction of all portfolios and a slight recovery in disbursements has been noted.
The Bank of the Republic indicated that, despite these contractions, The most recent results of various surveys could be pointing to a potential increase in credit dynamism during the second half of 2024.
It is relevant to highlight that, usury rates in the consumption, ordinary and rural productive credit categories showed a downward trend from April 2023 and January 2024, respectively. This is due to market dynamics and changes in methodology, resulting in a greater weighting of loans with higher amounts and lower rates.
The entity also warns that the imposition of interest rate limits may have negative consequences for financial deepening and inclusion, as has been observed in other economies. Such a situation may lead consumers to resort to informal financing sources.
The Issuer emphasizes that Changes in interest rates may force a repricing (set of actions and strategies carried out to carry out an automatic price adjustment, in order to be competitive at all times) of a significant percentage of the portfolio, which would limit the willingness of entities to grant new loans.
A hypothesis evaluated in the report suggests that, in a scenario of a downward trend in usury rates, could be observed repricing 26% for the consumer portfolio and 3% for rural productive credit. The central bank’s analysis attributes particular attention to rural productive credit, where a substantial percentage of disbursements comes from rediscount resources, implying interest rate conditions different from those of traditional credit.
Regarding the overdue portfolio, it is reported that The debt of small companies in the private corporate sector is concentrated in the commerce, agriculture and manufacturing sectorswhich represent 61.9% of the overdue debts.
During 2023, the share of overdue debt of small firms in the agricultural sector registered the largest increase. Furthermore, it is highlighted that Delinquency in loans granted to small commerce and manufacturing companies coincides with low GDP results in these sectors during the same period.
On the other hand, the Bank of the Republic indicates that interest rates are experiencing a reduction, particularly in the category of rural productive credit. This is largely attributed to the high proportion of disbursements with rediscount resources, which have different interest rate conditions than traditional credits.
