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Colombia GDP is expected to grow at moderate rates of 1.5% in 2023 and 1.8% in 2024, after a prolonged recovery that lifted output above its potential. Consumption and investment will remain subdued given tight macroeconomic policies and a fragile global economy, especially in 2023. Headline inflation started to decline in April and is projected to continue to decrease to the target by 2025. The main downside risk is tighter global financial conditions combined with pre-existing external imbalances. Monetary policy will remain tight to bring down inflation and re-anchor inflation expectations. The planned fiscal consolidation is necessary to ensure compliance with fiscal rules. Building additional fiscal buffers would be prudent given risks. Meanwhile, recent tax reforms provide fiscal space for proposed pension and health reforms that address long-standing inequalities and low social protection coverage. Decreasing informality and promoting gender equality would put Colombia on a path towards more inclusive growth. High inflation and macroeconomic tightening are slowing growth Fiscal and monetary policy tightening have started to slow growth, with average year-on-year growth rates slowing to around 2.6% in the last two quarters from more than 10% in early 2022, and consumer and business confidence continuing to decrease. In April, inflation started to recede after having reached a plateau during the first three months of 2023, but still stands at 12.8%. Inflation expectations are already past their peak – at the policy-relevant horizon of two years ahead they stand at around 4%, the upper limit of the 2-4% target range – suggesting a re-anchoring of expectations is gradually taking place. High wage growth, including the 16% minimum wage increase in January 2023, and a still-resilient labour market cushion the effect of high inflation on purchasing power.
Colombia
Source: DANE; BanRep; CEIC; and FEDESARROLLO. StatLink 2 https://stat.link/7h3zju
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 1: PRELIMINARY VERSION © OECD 2023