On Thursday, Finance Minister Ricardo Bonilla stated that it is projected that Colombia’s economy will grow by 1.8% in 2024, while inflation is expected to decrease to 5%. This will allow the central bank to reduce its benchmark interest rate to approximately 8%.
It is expected that the GDP growth for the year 2023 has reached 1.2%, as stated, which is lower than the minister’s previous forecast of 1.8% at the end of last year.
The fourth largest economy in Latin America had a low performance last year, while inflation has remained persistently high, reaching 10.15% in the 12 months leading up to November.
“We hope that the path of economic growth in 2024 reaches 1.8%, which signifies that we are gradually recovering from this global slowdown,” Bonilla stated during an interview in the capital, Bogota.
Bonilla stated that inflation is expected to be around 9.5% by the end of 2023, which is a significant decrease from the 13.12% recorded in 2022 but considerably higher than the central bank’s target of 3%.
Last week, a Reuters survey revealed that analysts are expecting inflation to have reached 9.43% by 2023.
Bonilla stated that the fact that inflation continues to decrease slowly but steadily means that we will not reach the central bank’s goal of 3% in 2024; it will be achieved in 2025.
A lower inflation would enable the central bank to decrease the current reference interest rate of 13%.
Bonilla stated that the government will have discussions with business leaders regarding President Gustavo Petro’s proposal to make changes to a fiscal reform -approved last year- in order to shift the tax burdens from companies to wealthy individuals.
“We are going to initiate a process of socialization with economic actors, business associations, etcetera,” said the minister, adding that any proposed changes would be sent to Congress for approval.
Since the initial fiscal reform was approved in early 2023, Petro’s government has faced difficulties in moving forward with a series of subsequent projects to reform healthcare, pensions, and labor.
The Colombian government has barely begun discussions on the fiscal rule, imposing limits on the fiscal deficit, which does not guarantee changes or plans to violate it, according to Bonilla. The fiscal deficit target for 2023 was 4.3% of GDP.
The country will keep issuing bonds and seeking loans, but it will try to postpone some maturity dates in order to increase investments.
“He said, ‘We are looking for new international players to participate.'”
