Recession or decline? This is the possible scenario for Colombia

Colombia is currently in a period of critical forecasts for its economy. The country, as well as several others in the world, registers historical inflationary figures. For October, the CPI was 0.72% and annual growth reached 12.22%.

Now, GDP a had a growth of 7 percent in the third quarter of 2022, that is 5.6 points less than the record for the second quarter of the year and 6.8 percentage points below the data from a year ago. The conclusion: the country is experiencing a significant economic slowdown.

(Read: What is coming for Colombia in economic matters? This is what the experts say).

This situation would continue in 2023 and even analysts have talked about a possible recession. What makes them different?

On the one hand, according to the economist Juan David Ballén, a economic recession occurs when the economy contracts for at least two consecutive quarters. “This is expected to happen in 2023 globally, including Colombia, due to rising interest rates, high inflation, the energy crisis in Europe and the mortgage crisis in China,” he explains.

On the other side, the decline of an economy it is determined, according to Ballén, when growth is decreasing. That is, it goes from 10% to 5% or from -1% to -3%. The expert clarifies that the recession always implies a decrease because the economy contracts. However, decline does not necessarily imply recession.

(In addition: GDP says goodbye to double-digit increases: economy grew 7%).

For Ballén, everything depends on the seriousness of the situation. In the event of a deep recession one of theThe biggest blows are for job creation.

“It is possible that Colombia enters a stagflationary regime, that is, that inflation remains high while economic growth weakens, which would greatly affect household consumption.“, says the expert.

Although the impacts are not uniform and depend on each society, the recession implies an increase in unemployment due to the lack of growth in the economy and decreases consumption due to the increase in inflation figures and, with it, the price of certain products and services.

These periods of economic crisis, according to Gloria Nancy Ríos, economist and specialist in management and master’s degree in social psychology, affect consumer confidence and have repercussions on producers, supply contracts and this, in turn, it implies less income, lower quality of life, more unemployment and economic instability.

(Read: Colombia will meet its fiscal goals in 2022 and 2023, according to the IMF).

According to the World Bank, the current crisis would have an effect on several world economies and, above all, on developing markets. For example, in the United States.

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