Colombia Saw Inflation Spike To 13.2%, One Of The Five Highest Levels In Latin America
In contrast to the year 2021 that ended with inflation of 5.62%, in 2022, historically high annual inflation was recorded for Colombia of 13.12%, that is, 7.5 points higher than the previous year, a peak level that had not been registered since 1999, 23 years ago.
The Ukraine-Russia war has affected fuel and food prices and caused inflation to increase worldwide. Latin American inflation reached 8.4% for the region in June 2022, which was the highest level recorded since 2005, according to data from the Economic Commission for Latin America and the Caribbean (ECLAC).
- United States: Highest inflation since 1981
- United Kingdom: Highest inflation since 1981
- Italy: Highest inflation since 1985
- Argentina: Highest inflation since 1991
- Sweden: Highest inflation since 1991
- Canada: Highest inflation since 1991
- Japan: Highest inflation since 1991
- Germany: Highest inflation since 1996
- Peru: Highest inflation since 1996
- Colombia: Highest inflation since 1999
Colombia came to occupy the one of the top five spots for inflation in the region, despite being far lower in inflation levels reached by Venezuela and Argentina, two countries that chronically occupy the first places. Colombia’s big problem was that, together with Chile, is that the Andean nation maintained stable values in terms of its price indices, but in 2022 both countries saw price indices costs affected in an unusual way.
Ranking of Latin American Countries by Interannual CPI 2022
- Venezuela 305.70%
- Argentina 94.80%
- Colombia 13.10%
- Chile 12.80%
- Honduras 9.80%
- Guatemala 9.20%
- Peru 8.46%
- Uruguay 8.29%
- Paraguay 8.10%
- Costa Rica 7.88%
- Dominican Republic 7.80%
- Mexico 7.80%
- El Salvador 7.30%
- Brazil 5.90%
- Ecuador 3.70%
- Bolivia 3.10%
- Panama 2.10%
Food and non-alcoholic beverages, accommodations, water, electricity, gas and other fuels, are the factors that most influence the rise in the Consumer Price Index (CPI) currently.
Colombian consumption sectors that saw increased prices beyond the composite index level of 13%
- Food and non-alcoholic beverages (27.81%)
- Restaurants and hotels (18.54%)
- Furniture, household items and for ordinary home maintenance (18.25%)
As for food, beef and beef products, rice and milk saw the largest increases during the year that ended.
Causes of Widespread Price Increase
Multiple factors cause this important rise in prices since on the one hand it is affected by the COVID-19 pandemic in 2020 with Covid-19. Another cause already mentioned is the recent conflict between Russia and Ukraine.
Not far behind is the climatic situation associated with the La Niña effect that caused exaggerated rainy seasons, negatively affecting national agricultural production.
Added to this Colombia’s dependence on imports, especially for grains.
Although the minimum wage increased more than inflation, the increase was less than in 2021.
According to a survey carried out by the analyst accountant Melisa Murialdo, spending power associated with the increase in the minimum wage that occurred in 2022, is practically consumed by the increase in basic consumer goods, and a new increase in the minimum wage would influence one more rise in inflation.
Despite the fact that in 2022 the nominal increase in the minimum wage was 16% – almost double the increase in 2021 when it had been 10.07%, as inflation doubled, the annual change in real wages actually decreased by 35% compared to the previous year, since real increases were 4.45% in 2021 and 2.88% in 2022.
Implications of exorbitant price increases – more debt
The problem is that inflation encompasses the generalized rise in prices, and when the price of the basic basket, of daily consumption, is taken into account, the increase was much greater (28%) than the increase in wages (16% nominal; 3% real) felt in Colombia. Colombian families must resort to new strategies for their subsistence. According to Bancolombia, the main source for retail consumption is employment wages, but since wages fail to cover the increases of the past year, today consumer loans are becoming more popular, including credit cards, personal and mortgage loans.
The granting of retail credit grew by 33.5% during June of 2022 compared to the previous year, while the use of credit cards grew by 43.8% compared to the same month of 2021.
This data is concerning, as bank debt grows and in 2020, Colombia’s central bank, the Bank of the Republic lowered interest rates, making retail lending more accessible, but less sustainable in the long term. The consequence is the rise in retail indebtedness.
Although the prospects for 2023, according to international organizations, are good, currently the concern for Colombian residents is still less, although it is a problem that is affecting the entire world.
National Administrative Department of Statistics DANE
Economic Commission for Latin America and the Caribbean (ECLAC)
Permanent Commission for Concertation on Wage and Labor Policies