Colombia’s 2024 Economic Forecast

Experts predict changes in Colombia’s key economic indicators for 2024, showing improvement from 2023. These forecasts include growth and challenges for the nation’s economy.

The Bank of the Republic has missed its inflation target since 2019, aiming for 2% to 4%, with a specific goal of 3%.

Inflation has been hard to manage. It dropped below 2% in 2020 due to the pandemic. Since 2021, it has exceeded 10% and not returned to the target range.

Yet, since April 2023, inflation rates have started to slow down. This decrease led to discussions about inflation control by President Gustavo Petro’s government.

In December, monthly inflation hit 0.45%, lower than the expected 0.63%. The annual rate reached 9.28% in 2023,

Perishable food prices drove this surprise, but climate conditions in January might change this trend.

Predictions suggest a 5.50% average inflation rate for the year’s end, with the lowest at 4.40% and the highest at 7.81%.

Modest GDP Growth

The market has observed signs of Colombia’s economic slowdown since late 2023.

Despite recession fears, November’s Economic Monitoring Indicator (ISE) showed a 2.3% growth, easing concerns.

Andrés Pardo Amézquita of XP Investments views the ISE data as positive but not changing the slowdown trend.

“The growth from October to November was 0.9%, only partly offsetting the previous month’s 1.1% drop,” he explains.

The GDP is expected to have grown by 1% in 2023, with an estimated 0.75% increase in the last quarter.

For 2024, the market forecasts a 1.46% GDP growth, driven by a 2.21% increase in the fourth quarter.

The first three quarters are expected to grow by 0.27%, 1.26%, and 1.64%.

Standard and Poor’s downgraded Colombia’s outlook due to low economic growth, indicating potential future downgrades from the current BB+ rating.

Unemployment Reflects Slowdown

Although unemployment rates have improved, currently under 10%, the economic slowdown is expected to impact future rates.

November ended with a 9% unemployment rate, with the fourth quarter projected to close at 9.51%.

Forecasts for the coming quarters range from 11.26% in the first quarter to 10.21% by the year’s end.

Other Economic Indicators

The representative market rate saw a significant recovery in 2023, moving from over COP$5,000 per dollar to around COP$3,950 by year-end.

Predictions for 2024 suggest stability around these levels, with a slight increase to COP$4,004 by year-end.

Interest rates are expected to normalize, starting with a 50 basis points cut in January, eventually reaching 8.28% by year-end, indicating a total cut of 475 basis points.

Lastly, fiscal and current account deficits are projected to be 4.36% and 3.41% for 2023, improving slightly in 2024.