Yesterday, Fedesarrollo published the latest analyst survey for May – and again the indications are that the economy continues to heat up, which as stated before, is a double-edged sword.
Growth: We now know that Q1 GDP stood at 8.2%, well above the 7.4% expected and now we see a recalibration of the FY 2022 number. A month ago, the consensus stood at 4.6% – that number is now 5%, either of which would point to Colombia being the fastest growing economy in Latam. The expectation for Q2 is now at 6.7% – but judging by the local activity, that could be an understatement. All this during a period when the Presidential elections were going to supposedly impact the economy.
Inflation: With such rapid growth and the global geopolitical situation, there are real concerns about how high CPI could go. In May inflation touched 9.23%, a figure not seen for many years – again this has pushed the YE 2022 estimate to 8% – from 7%. The Central Bank’s target range is 2-4%, even by the end of 2023 that may not be attainable. A year end number of 8% would have an impact on the minimum salary negotiations.
Interest Rates: With inflation comes higher interest rates. At 6% they have already grown considerably but the terminal rate is now standing at 8.25% by the end of the year, before falling during Q1,23.
The Peso: The lottery continues with the currency. Year-end expectations have risen once again at $3850 ($3800 last month) but there are so many variables globally it is at best a guesstimate.
Investments: With an election upon us 54.8% of money managers cite Sociopolitical factors as the main variable when considering investments. Monetary policy (22.6%) is next on the list. In terms of what to invest in, most products are stable however there was a drop (-26.7%) in local stocks and a rise in cash to 33.3%. In terms of the COLCAP 74.7% expect a decline over the next three months.
Sectorially, financials (94.1%) are the top pick followed by energy (82.4%), while oil has dropped away to 35.3%. Top Picks within that are Bancolombia (41.2%) & GEB (35.3%).
SMCI: In terms of stock market confidence there was another decline of 6.4% to 71% which is clearly reflected in the COLCAP outlook above.
The full details of both reports (in English) are to be found on the BVC webpage on the following links.
That is about it for today – remember these are just themes that jump out at me – please refer to your local analyst, economist, salesperson or soothsayer for more details.
My regards to all,