Sharp Slowdown Projected for Colombia’s Economy in 2023

Colombia’s economic growth is likely to slow down sharply in 2023, from the current 6.5% to less than 2%, global rating agencies have warned.

The warning comes as the country’s central bank continues to jack up interest rates in a desperate bid to bring inflation in line with its 3% target.

The rising interest rates as well as inflation might undermine consumption, noted Fitch Ratings.

With inflation rising above the 11% mark, the central bank raised rates by 100 basis points in its latest policy meeting. Colombia has raised rates by 825 basis points since September 2021.

The rising living cost has become a politically sensitive issue in Colombia ever since the country lost the crucial investment grade credit rating last year, after the government abandoned its plan to raise taxes to finance pandemic spending.

Colombia’s fiscal deficit has also widened to a great extent largely due to the pandemic and years of economic slowdown.

The country’s Finance Minister, Jose Antonio Ocampo, told Reuters recently that regaining investment grade ratings is the top objective of the government.

“The global economy is decelerating very strongly, that will hit us too, high interest rates because of the whole world’s fight against inflation are also a cause,” Ocampo told the newswire, admitting that the economy is losing momentum.