Slow pace of the economy could be extended due to uncertainty and fiscal risks

The Corficolombiana economic research center presented this Tuesday – October 22 – the update of its projections and fiscal balance for the country, in which it reiterated its warning that the seed of growth is at risk and added that one of the most fears big ones that analysts have these dayscould materialize if everything continues at the pace that is being observed.

During a webinar in which they shared their perspectives, these experts stated that it is no secret to anyone that the economy is growing and there is an increasingly better dynamic, but they were clear that this development is modest and is interpreted as a slow step, which It will extend longer than necessary if problems such as fiscal risk and low investment due to investors are not resolved.

rmation: GDP, inflation and unemployment: this is how Colombia would fare in 2024 and 2025, according to the IMF

César Pabón, director of economic research at Corfi, stated We must start because economic activity is showing signs of reactivation that cannot be consolidated due to low investment and the erratic behavior of sectors such as public administration and agriculture. This is without taking into account the fact that an optimal pace to be competitive has not yet been reached.

“We insist on the importance of the seed of growth, which for us is investment, this should be one of the most relevant topics to discuss in the current situation and where the debates of all of us in the economic context should converge. We must generate strategies to recover this line,” said Pabón.

Regarding the Gross Domestic Product, Corficolombiana expects this year to close with an annual variation of 1.8%; while by 2025 they aim for this value to increase to 2.6%. That said, they put on the table that there is an uneven economic rhythm that is being driven by public spending and household consumption, since the investment has not yet recovered all the ground lost two years ago.

“We see more positive data in terms of economic activity. The reactivation is moving at a slow pace, but there are some external winds of uncertainty, while at the local level there is progress in terms of disinflation and we believe that the target range would be reached in the middle of next year. year, but there are still risks in this matter,” added Cesar Pabón.

Uncertainty and inflation

Moving on to the flagella that for the Corficolombiana researchers could extend the slow pace more than it should, one of the first that was put on the table were the economic projections abroad, mainly in the United States, since for them, although the possibility of falling into recession was ruled out, they still There is talk of a forced landing and that this year will close with very discreet progress.

“There is great uncertainty behind the growth forecasts in the International Monetary Fund, which although they remained constant, it is seen that there is global uncertainty, mainly due to the elections, we have many elections in the world, as is happening in the United States. In addition, the Fed began its rate reduction and winds have been generated that cannot be ignored,” said Pabón.

Also read: Comptroller’s Office orders Populated Centers to pay the State $87,027 million

On the other hand, regarding the local market, Corfi’s projections suggest paying attention to indicators such as inflation, which has been falling, but remains far from the target range and in its disaggregation there are pressures that will not end. changing the trend, but they could influence the reductions to be slower than expected.

“Inflation is not yet an defeated issue, although it has slowed down, there is still some time to get to where we want. Our bets at this moment are more on the side that a space is opening up for us to look elsewhere, without neglecting here, and that the Bank of the Republic can lower interest rates,” said the Director of Economic Research of Corficolombiana.

Economic Slowdown

PHOTO: iStock

That said, they propose three scenarios for the cost of living (bullish, base and bearish) in which In the best of cases this reference would end 2024 with an annual variation of 4.9%, while if everything continues as it goes and there are no major surprises, they point to 5.6% in December. In the worst case scenario, if the downward pace were reversed, these analysts predict it would end at 6.1%.

“For us, the Issuer has the possibility of making reductions of 75 basis points in the following meetings, although we do not overlook that inflation for us would only reach the target range until mid-2025. This is an indicator that has not yet expired. “, they added.

tax rule

Finally, and addressing the other risk that Corficolombiana perceives to be latent, compliance with the fiscal rule also worries these analysts, who consider that a spending cut of at least $40 would have to be made. billions in public spending if we want to stay outside this red line.

Other news: Petro’s ‘problem’ with the COPs: ‘Governments only talk and do not act’

“There are latent threats to public finances, which may be the most sensitive issue for stability and confidence this year. This has impacted risk indicators. We also see latent risks caused by the fall in investment, which is reaching to its minimum levels. This is close to 14 points of GDP, when before it was around 25 points. This has direct implications on potential GDP,” Pabón said.

It is worth remembering that in the run-up to these alerts it was known that During the first eight months of the year, the Nation’s accounts reached an accumulated deficit of $72 billion, which represents 4.3% of GDP and is consolidated as the highest in the last 20 years, after the pandemic, mainly due to the drop in the Nation’s income.

Colombian pesos

iStock

“Here we are talking about the seed of growth, our central theme of the year, because it remains at risk, mainly due to lack of investment. For us, the goals of generating employment and overcoming poverty will not be achieved if it is not guaranteed that this progresses and recovers,” concluded César Pábon.

Experts such as Roberto Steiner, co-director of the Banco de la República, Andrés Velasco, president of Asofondos and the commentator and political analyst Andrés Mejía also took part in this event; who agreed with several of these alerts and reiterated that investment is the driving force rebuild to boost the economy and for this to happen, it is necessary to generate trust.