“External risks remain high due to the escalation of the ongoing war in Ukraine. While Colombia will benefit from higher hydrocarbon prices, the rise and volatility of international food and energy prices, as well as more persistent disruptions in global supply chains, would exacerbate domestic inflationary pressures,” he says in the most recent report of the International Monetary Fund, on the country's economic forecasts for the year 2022.
The international body gave the go-ahead for improving the management of public finances and the intention of maintaining fiscal credibility, and emphasized the need to continue efforts to prevent money laundering in Colombia.
The IMF also recommends that the country should carry out structural economic reforms, in order to stimulate productivity, competitiveness and “greener inclusive growth”. The report assures that inflation in Colombia will persist throughout 2022, approximately 6.75%; in addition, that international conflicts, together with possible new outbreaks of COVID-19, may cause poor or volatile growth in the national economy.
According to the report, it is assured that “accelerated monetary tightening” is appropriate to reduce inflationary pressures and safeguard the credibility of the monetary policy framework. This means that, in the eyes of the International Monetary Fund, a new rise in interest rates is expected, which could be announced within the framework of the Board of Directors of the Banco de la República, which will take place next Thursday, March 31.
“Backed by a still-accommodative monetary stance, the output gap is expected to close in the first half of 2022. In the medium term, the growth of Gross Domestic Product (GDP) is expected to converge to its potential growth rate of around 3.5%,” adds the multinational body.
IMF directors agreed with experts who conducted the country's periodic assessment on the desirability of “accelerating the tightening of monetary policy to alleviate inflationary pressures”, in addition to “continuing to save”, controlling spending and “phasing out exceptional support measures, as conditions permit”.
They also called for:
The IMF acknowledged that the “Social Investment Law” constitutes an important step in strengthening the fiscal framework. They emphasized that deepening fiscal reforms aimed at obtaining new sources of public revenue and improving spending efficiency would safeguard critical social programs and public investment, while further cutting debt.
The report of the technical staff reflects the discussions held with the national authorities, from 1 to 15 February 2022. It focuses on the challenges Colombia faces in the short and medium term and on economic policy priorities, taking into account the pandemic and subsequent economic recovery.
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