Colombia and Mexico are the major single-target economies in the region that have not yet halted interest rate hikes. Financial and insurance activities had the most important contribution to annual GDP growth and presented the highest growth rate. In 2022, Colombia reached such high inflation that it stood at 13.12%.
The National Statistical Administrative Department of Colombia (DANE) shared a report indicating that in the first quarter of 2023, the Gross Domestic Product in its original series grew 3.0% in the country, compared to the same period in 2022.
Colombia has been facing a major economic crisis, especially during 2023, and the figures revealed by the most recent DANE report do not prove otherwise. Although the fact that GDP grew by 3% is something positive, this figure reveals the significant slowdown that Colombia has been experiencing since the end of 2022.
At an official event, Piedad Urdinola, director of DANE, assured that GDP growth in Colombia is mainly linked to three sectors of the economy, among which are financial and insurance activities, artistic and entertainment activities, and public administration.
Out of the three abovementioned sectors, financial and insurance activities had the most important contribution to the annual growth of added value, and presented the highest growth rate (22.8%): “All the lines of economic activity had a positive growth, except for construction, which is the only one that has a decrease, and it is explained especially by the fall in civil works, we see the other lines still dynamic.”
GDP Grew 3%: This Has Been Its Behavior
DANE also revealed that, by reviewing the historical GDP data, the growth for the year 2022 would have been 7.3%, instead of the 7.5% data that was reported in past months.
Faced with these figures, the newspaper La República reported that growth and inflation are cooling in most of Latin America, but Colombia and Mexico are the main economies with single targets in the region that have not yet stopped the increases in interest rates.
El Banco de la República expects that. given that the GDP grew by 3%, the monetary policy authorities could consider cuts in interest rates, as inflation slows down towards its target. Last week, Finance Minister Ricardo Bonilla said he expects the central bank to discuss interest rate cuts in the second half of the year.
Historical High Inflation Levels in 2022
Inflation in Colombia was well above what was expected by the market during 2022. Month by month, inflation in Colombia closed in 2022 at 1.26%, leaving an increase of 0.53 percentage points, as compared to the figure reported at the end of 2021.
It is worth noting that, according to Bloomberg, on average, the market expected inflation to close in 2022 at 12.62% per year, while the projected monthly rate was 0.82% on average. These data arose from a survey carried out by Citi, in which 25 market experts are consulted.
This is the first time that Colombia reaches such a high figure after March 1999, when inflation reached 13.51%, since it stood at 13.12%. According to DANE, food contributed the most to the annual growth in prices in December 2022.
By Audy Castaneda
