Bogotá, May 2 (EFECOM).- The Organization for Economic Cooperation and Development (OECD) predicted “another year of modest growth” for Colombia, with a forecast of 1.2% for 2024 and a rebound of up to 3. 3% in 2025, according to the latest report on economic prospects for this and next year.
In these new forecasts, released this Thursday, the OECD maintained its forecast regarding Colombia’s growth for 2024 that it had already made in November of last year.
Colombian GDP grew only 0.6% in 2023, half of what was expected.
Regarding inflation, the document indicates that it is gradually slowing down in Colombia, although it remains high, and will not be within the target range until the second half of 2025.
Colombia registered an interannual inflation of 7.36% last March and the Bank of the Republic (monetary authority) expects that next year it will converge towards the goal of 3% annually.
In addition, the OECD predicted a partial recovery in investment, which will rebound from the second half of 2024 “as financial conditions relax,” although uncertainty “will continue to weigh on private investment.”
A prompt resolution of political uncertainty over social reforms, greater certainty over energy transition regulations and faster implementation of the reindustrialization policy would also help increase investment, according to the OECD report.
The agency added that, meanwhile, fiscal plans foresee an increase in public debt in 2024, with several factors suggesting that compliance with the fiscal rule could be a challenge.
Private consumption will remain “solid”, supported by disinflation, the relaxation of monetary policy and significant remittances; and exports will grow moderately. In fact, consumption is 20% higher than in 2019, before the pandemic.
Regarding interest rates, the OECD considers that the Bank of the Republic, which began a relaxation policy in December 2023, and this Tuesday decided to lower them to 11.75% annually, will continue to cut them, with “real rates returning to a neutral position from mid-2025.”
In a context of falling inflation and a negative output gap, “monetary policy should continue its prudent and data-driven easing cycle, ensuring a gradual return of real interest rates towards neutral levels,” the OECD recommended. to Colombia.
The OECD insisted that it is “necessary” to maintain fiscal consolidation and respect fiscal rules to avoid rising debt levels and respond to investor concerns about fiscal sustainability.
“Revitalizing investment is essential not only for short-term growth, but also to improve Colombia’s growth potential, and is necessary to accelerate income convergence with advanced countries and reduce poverty,” he added.
The recovery of investment involves “a continued and demonstrated commitment to the traditionally solid macroeconomic framework, including compliance with the fiscal rule,” added the projection of the international organization. EFECOM
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