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 its new report on economic outlook for this and next year.
In these new forecasts, released this Thursday, the OECD maintained its forecast regarding the growth of Colombia for 2024 which had already been done 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) It 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 ease”although uncertainty “will continue to weigh down private investment.”
An early resolution of political uncertainty over social reforms would also help increase investment, orGreater certainty regarding energy transition regulations and faster implementation of the reindustrialization policy, 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 tax rule could be challenging.
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, it will continue to cut them, with “real rates returning to a neutral position from mid-2025.”
recommendations
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 increasing debt levels and addressing investor concerns about fiscal sustainability.
“Revitalizing investment is essential not only for short-term growth, but also to improve Colombia’s growth potentialand it is necessary to accelerate income convergence with advanced countries and reduce poverty,” he added.
The recovery of the investment involves “a continued commitment and demonstrated with the traditionally solid macroeconomic framework, including compliance with the fiscal rule,” added the projection of the international organization.
