In Colombia, Inflation and Rain Are Hopefully Both Falling Again

After the Easter week, when few were to be found at their desks, this week should see a return to normal. Or, at least, whatever that looks like in Colombia.

Many of the headlines will be reserved for Friday when National Administrative Department of Statistics (DANE) reveals the inflation number for March. The expectation is that it will have dropped again. According to the Fedesarrollo survey, it is estimated to come it at 7.34%, down from the current 7.74%. Meanwhile, the same survey is now expecting a 5.51% year-end inflation rate to close 2024.

If the analysts are correct, that will comfortably give Banco de la República room to cut another 50bps (to 11.75%) when they sit down in a few week’s time.

That conversation will no doubt be helped the weather experts appearing to be spot on with their El Niño estimate, which suggested it would break last week. There was certainly lots of rain, but XM is still suggesting people need to be careful with energy (which has been impacted by the drop in hydroelectric reservoirs) given that demand rose 8.31% year-over-year in March. Nonetheless, overall, it looks like Colombia will soon be into a normal weather pattern, having had a narrow escape from the dry period.

Hopefully, the central bank will also have taken note of the national unemployment data for February, which stood at 11.7% versus 11.3% a year ago. That is the first year-over-year increase in a very long time — and that backslide sits firmly at the door of a Banco de la República committee that has stubbornly refused to lower rates.

The International Monetary Fund (IMF), in its latest report, highlighted the authorities work in getting the economy back on track after an unbalanced 2021 and 2022. Some of that is the aforementioned central bank raising overnight rates, albeit too far, but also captures the work on the external deficit.

Colombian President Gustavo Petro may take a lot of flak, but the economy has far from come off the rails since August 2022, despite the new head of state inheriting a number of problems from the administration of former President Iván Duque.

If the IMF and ratings agency are generally happy, perhaps the press should take another look. Of course, there is work to do still. But one step at a time.

Finally, the spat in Antioquia over 4G, etc., and ‘Vaca (Piggy Bank)’ continues.

This is effectively local politicians (and some other entities that should know better) stirring up the press in order to gain a few points ahead of the 2026 elections. The government has already stated the original money will be delivered for the infrastructure projects by the July deadline.

The issue is the overspend, which is considerable, and you can’t just print $100 of millions of dollars — not in Colombia anyway. The budget is tight — and being handled carefully — and the money has to come from somewhere. But doubt it will appear before the ‘Vaca’ is filled, which is currently projected to be in June 2025.

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