He Corficolombiana economic research center recently provided its updates on the economic growth projection for the country, which were a little more positive than most, but they issued a strong warning regarding investment and public debt management.
Corficolombiana hopes that the Gross domestic product of the country has a total variation of 1.3% for this year. This translates into an upward adjustment, since it was previously at 1%.
(More: 'Colombia will continue with a long-standing plan to meet payment obligations': IMF).
César Pabón, director of this research center, said that broken down by quarters, the report projects 0.2% for the period between January and March, 1.3% between April and June, 1.4% from July to September and a strong rebound of 2.1% for the quarter between October and December. Nevertheless, reiterates that this depends on how much aspects such as trust and investment improve.
“Potential growth in the coming years will be closer to 2.5%, which is the main concern, because this puts macro stability at risk, to the extent that fiscal risks increase, and per capita income decreases. which is where people's pockets are finally touched”he explained.
Debt
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This is why for this analyst three fundamental elements stand out: reactivate infrastructure and construction, promote economic reactivation plans at the local level and reduce uncertainty. The importance of mitigating fiscal risks and generating an environment of certainty to boost investment is emphasized..
One of the alerts that drew the most attention in this Corficolombiana report had to do with the risk of the country falling into a “debt spiral”, which generates a snowball effect, since when economic growth is low and interest rates on public debt are high, a precarious situation is created.
(Read: The G20, the IMF and the World Bank highlight progress in global debt management).
Julio Romero, chief economist in charge of this reportexplained that if debt interest payments grow faster than the economy as a whole, a snowball effect is generated that can lead to an unsustainable scenario that must be avoided at all costs.
Debt
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“Today we are a bit on the edge of an interest rate higher than the growth of the economy, which could, if we do nothing to grow more or lower the interest rate or both, lead to Colombia in the coming years has a debt much higher than what it has today and thus it will be very difficult for the country to reach investment grade again”Romero said.
The Corficolombiana report also presented its projections regarding the cost of living, foreign currencies and interest rates, starting with the Consumer's price indexwhich assured that it will end the year at 5.5%, due to certain latent risks, such as those related to prices regulated by the ACPM and the indexation of salaries. Previously they had this figure at 5.1%.
Regarding the dollar, it stands out that its behavior has been a surprise for many, due to the increase in oil prices internationally. However, they warn that a correction is expected in the second half, anticipating a trend towards the depreciation of the Colombian peso, especially due to fiscal risks and uncertainty.
(Also read: They launch a fund in Colombia to invest from $50,000 in local and global stocks).
Debt
PHOTO: iStock
In relation to interest rates, Corficolombiana highlights that the cautious stance shown by the Bank of the Republic be maintained at the next meeting, with a possible additional reduction of 50 basis points.
However, it projects that a steeper reduction of 75 basis points could occur at the June meeting, leading to an intervention rate of 8% by the end of the year. This projection is subject to economic conditions and inflation remaining stable..
DANIEL HERNÁNDEZ NARANJO
Portfolio Journalist
