What Jumps Out: The Week That Was

The week ahead of the holiday weekend has been another in keeping with the season, nice and peaceful, especially when compared to the period of turbulence we experienced between Gustavo Petro’s swearing in as president and the completion of the tax reform.

A calm has descended on Colombia which is perhaps best reflected in the Peso which has gained 7%, to $4761 since hitting a low of $5120 on November 4 – critics will simply say it’s a reflection of the global move against the dollar and there is a modicum of truth in that however, that is to ignore an 18% decline in Brent Oil prices over the same period – a move which would normally impact negatively on the Peso.

Petro’s first months may have been turbulent however Finance Minister Ocampo has done good work in the co-pilot seat in order to calm the nerves on issues such as the tax reform, capital controls and the oil sector – of course if President Petro was a touch less active on Twitter, such firefighting could have been avoided.

Ocampo yesterday gave his economic outlook for 2023. GDP is expected to rise 1.3% which is in-line with many analyst’s expectations – it may not be the ~8% of 2022 but it will still represent outperformance in the region. Inflation is predicted to come into 7.2% with a fiscal deficit of 3.8%. In order to control that deficit fuel subsidies will continue to be removed, with repayments made to Ecopetrol, all way overdue. Also 18.5% less local debt (US$5.62bn) will be issued in 2023 – all sensible stuff.

Rupert’s opinions & analysis as an independent expert contributor are his own and not necessarily those of Finance Colombia or the BVC.

Ocampo added that inflation should have slowed in December (we will find out January 5) and this will allow the central bank to cease the tightening cycle.

The government, meanwhile, is working right hard to control the impact of the 16% minimum wage hike. They have prepared a 47-page document that will look to limit at 60 items from the 204 products that increase prices automatically by the same 16%. They would increase by the ~12.5% FY inflation instead. The government is also looking at limiting other products outside of this list in order to increase the purchasing power of those receiving the 16%. Again, a simply logical move in the fight against inflation.

This week we had the economic activity reading from the DANE for October (4.6%) which was up from and adjusted 4.4% last month but below estimates of 4.8% and well below the 10% recorded 12 months ago – another indicator to add to those over the last couple of weeks pointing to a noticeable Q4 slowdown. Wherever you look at the moment, be it construction, retail sales or energy demand – the clues are there that the economy is slowly but surely rolling over.

Import data for the same month whilst robust (US$6.1bn) and above expectations, also pointed to the same slowdown. Most sectors were down YoY however a few areas such as petroleum and vehicles gave a healthy appearance to the headline figure but underneath things have plateaued somewhat.

That is about it for this week – wishing all of you a very peaceful holiday weekend, however you celebrate it.

Please find below the LinkedIn video report:

https://www.linkedin.com/posts/rupert-stebbings-927b6316a_colombia-economy-activity-7011958656007045120-X4ob?utm_source=share&utm_medium=member_desktop

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,

Roops