The Colombian Finance Minister, José Antonio Ocampo, showed a favorable and recovered economy in a seminar organized by the National Association of Financial Institutions (ANIF) of his country, even though he warned of certain risks due to inflation and the hardening of external financial conditions.
On the one hand, he said that the rise in domestic prices had hit the local economy, considering the measures taken by the Bank of the Republic to stop its effect. Still, he considered that the positive side is that exports have been favored.
“The boom in commodity prices after the war has resulted in greater inflationary pressures,” he noted.
Although he estimated that “we have already reached the peak of global inflation,” he stressed that “the decline will be slow. An example of this is that in the US last month, there was a decrease in inflation, but it is still very high by their standards”.
The minister also warned that the Colombian economy “will slow down in the second half of the year. The increase in interest rates and higher inflation will impact the growth rate in the coming quarters, and we foresee that during the second half of the year, there will be a growth below 10%”.
In this sense, he emphasized that economic activity will remain dynamic in 2022, although with a slowdown in the second half, which “will be maintained in 2023”.
Investments
Another point the minister highlighted during his seminar speech was the dynamics of capital flows, which have been stable in the first half of the year.
In this regard, he commented that the visit of Spanish President Pedro Sánchez and a delegation of business people left happy accounts for the South American country.
“Spanish investors are number one, if we subtract oil, in investments in Colombia. During the meeting, they announced US$1.5 billion more in direct investments, which is a positive point to continue improving foreign direct investment expectations in the country.”
During the meeting, Ocampo said that the government of President Gustavo Petro has proposed to face three challenges.
First, he noted that it would address the country’s weak social conditions, with a labor market that has practically recovered but is of concern due to the high levels of labor informality.
“In addition, we are concerned about the growth of poverty, which has been rising since before the pandemic and has left more than four million people below the poverty line,” he explained. He added that they are also attentive to the increase in inequality.
Added to this is the challenge of reducing the “high” trade deficit, which they seek to diversify their exports.
“Although all items are recovering (…) we are just beginning the process of diversifying our shipments, but we consider the competitiveness of the exchange rate to be relevant for the country’s export dynamism”, he explained.
In this sense, he pointed out that this challenge is faced with the reversal of the premature deindustrialization of Colombia, “which has to do with low investments in science and technology, what I call the national shame”.
Finally, the third challenge for the new Colombian administration is related to the “weak” public finances, which will be countered with the tax reform that aims to complete 2 points of GDP by 2023.
In addition, this reform will allow to face all the challenges faced by the Executive to improve social conditions, face the deficit, and strengthen the country’s finances.
With information from DF SUD