Despite the downside activity surprise, we still expect GDP to drop 7% in 2020.
For 2021, we maintain our growth forecast of 3.0%, with downside risks
For 2021, we expect a broad-based growth of 4.0%.
Non-natural resources sector supported November’s activity expansion
A slow rollout of the vaccination program amplifies downside risks to activity.
Noticeable acceleration in annualized quarterly inflation, which hit 54% in 4Q20.
Higher soy prices unlikely to help an unbalanced economy
More populist initiatives from Congress
A swift vaccination rollout could compensate a weaker start to 2021.
Internal demand indicators remain far below pre-outbreak levels
Industrial production growth was driven by construction output
The strong CLP performance and the re-introduction of mobility restriction measures would contain pressures ahead
Non-core food prices exerted downward pressure, which was partly offset by a rebound in core inflation as the “Buen Fin” effect faded away.
Deputy Governor Heath and Esquivel were the dissenting votes.
Dynamic consumption and recovering oil prices would lead to a narrower trade surpluses ahead
Renewed mobility restrictions and significant COP appreciation will keep inflationary pressures contained at the start of 2021.
The recovery at the margin is reflecting the economic reopening and economic stimuli.
While commerce will remain dynamic, tighter mobility restrictions mean that the recovery path is set to be uneven.
Incipient signs of improvement in employment could be countered by social distancing measures and the minimum wage increase.
All sectors posted sequential gains in the quarter ended in October.
Monthly GDP continued recovering on a sequential basis.
The numbers confirm that the effect of Black Friday on November inflation was transitory
We see rates stable at 0.5% throughout 2021 and part of 2022
The minority is concerned with the possibility of a wider-than-estimated negative output gap.
We see downside risk to our primary deficit forecast of 6.9% of GDP this year
We see downside risk to our trade surplus forecast of USD 15.0 billion for this year.
A split board and the change in guard mean a deeper easing cycle cannot be ruled out
The economic reopening and signs of a recovering labor market are supporting improved import dynamics.
Domestic demand recovered at a slower pace than the external demand
We expect Banxico to resume cutting the policy rate as soon as 1Q21.
We recently raised our 2020 GDP growth forecast to -11% from -12%
The economy continued to recover in the beginning of 4Q20.
Lower-than-expected headline inflation does not brighten the cloudy horizon
Downside risks to our GDP growth forecasts.
With the economic reopening enduring at the backend of 2020, the continuance of the activity recovery is expected ahead.
Solid macro fundamentals offset political turbulence.
Macro outlook remains challenging.
The government accessed the FCL amid a challenging fiscal situation, while a tax-reform is expected in 2021.
A fall in non-core fruits and vegetable prices also exerted downward pressure.
Investment dynamics would play a key role in the CB’s reaction function.
Inflation for 2020 will likely come in closer to 1.5%, rather than our current 2% call.
Imports remain weak as uncertainty restricts investments and the energy drag persists.
Inflation came below expectations, hinting that pressure form pension withdrawal faded.
Despite soft domestic demand, weak terms-of-trade mean Colombia’s trade deficit correction is slow.
We now expect end of year 2020 inflation at 2.0% (compared to our previous forecast of 1.6%).
Despite signs of a recovery, GDP remains well below pre-pandemic levels.
Self-employment leads job recoveries, but private salaried posts are also posting gains
With industrial production improving and retail sales surging, we expect the monthly GDP proxy to rise for the first time since February.
The unanimous decision is consistent a prolonged period of rate stability.
Lower unemployment was led by job gains at the margin
Manufacturing exports surpassed pre-outbreak levels
The recovery was driven mainly by the manufacturing output
Deputy Governor Jonathan Heath was the dissenting vote.
Still retail sales remain below pre-outbreak levels.
Doubts over how persistent is the recent fall in inflation.
The improvement in the current account balance was supported by the trade balance of goods.
We forecast a GDP contraction of 12% for this year, but the risks are tilted to the upside
Core goods non-food inflation slowed down amid Mexico’s black Friday
We recently revised our trade surplus forecast down to USD 15.0 billion
We forecast a primary deficit of 6.9% of GDP this year, up from 0.4% in 2019.
Final domestic demand recovery is supported by public and private demand
Monetary and fiscal stimuli and individual liquidity injections would consolidate the recovery ahead.
Going forward, the consolidation of an activity recovery would lead to gradually wider current account deficits
Despite the loosening of mobility restrictions over the course of the quarter, subnormal activity endured
Tax collection improved in 3Q20 in line with economic activity.
Non-natural and natural resource sectors recovered further in September
The closure of borders during tourist season will hamper the recovery
The government has made a slight shift toward orthodox economic policies
The reopening of the economy, improving private sentiment and significant monetary stimulus would sustain the recovery process
We cannot rule out further cuts ahead if the activity recovery underwhelms and inflation expectations retreat
Milder import declines suggest a gradual domestic demand recovery is underway
Inflation was markedly above the Bloomberg consensus estimate of 3.1%.
We expect Banxico to resume the easing cycle next year.
Heightened political turmoil amid market-unfriendly measures
Industrial production recovery is driven by the manufacturing output
We now expect inflation at 3.9% for yearend 2020
The economic reopening and significant stimuli in place should moderate the trade surpluses ahead
Muted inflationary pressures and a gradual activity recovery support a prolonged period of rates on-hold
Still, internal demand indicators remain far below pre-outbreak levels
Inflation will likely end the year close to the central bank’s 3% target
The average policy rate would be marginally higher than the October median analyst expectations
GDP sits around 7% below the level prior to the pandemic, recovering from the cycle low of -16.2% in May
Flexibility on the unconventional measures will depend on possible financial market volatility ahead
While the labor market is recovering, numerous uncertainties point to a gradual improvement ahead
Lingering economic uncertainty would contain the pace of the recovery ahead
Activity recovery is driven mainly by the industrial sector
The MoF deteriorated slightly their fiscal balance estimates for 2020
With the economic reopening consolidating, as health indicators remain controlled, the activity recovery is expected to persist ahead
Developments on the global front highlight that significant uncertainty persists
The improvement in the trade balance is mainly supported by manufacturing exports
Industrial output is recovering at a faster pace than services sector
The easing of distancing measures supported the recovery
We forecast a GDP contraction of 12% this year.
Persistence in inflation increases the odds of Banxico pausing its easing cycle
Our forecast for a surplus of USD 17.5 billion for this year has downside risks.
Our forecast for the primary fiscal deficit this year stands at 6.9% of GDP (from 0.4% in 2019).
Low terms-of-trade and still weak global activity mean Colombia’s external imbalances would persist.
Non-natural resource sectors supported the recovery in monthly GDP
The central bank would retain a significant monetary stimulus ahead, while adjustments to unconventional measures will be data dependent
Disappointing activity at the start of 2H20 likely mean the GDP contraction this year would exceed our 6% call.
Core inflation slowed in September.
The annual inflation uptick is likely transitory amid a low base of comparison.
Core goods inflation remained persistent
Available room for maneuver will be data dependent
Improving consumer import dynamics is containing the surplus widening.
Despite the widespread acceleration at the margin, inflation remained low in September.
Agricultural sector moderates fall in GDP
However, momentum remains weak
We maintain our inflation forecast for this year of 9.5%.
Political environment remains shaky
Narrower fiscal deficits for 2020 and 2021
The central bank has tigthtened exchange controls further
The FCL eligibility shows Colombia’s structural strengths, but the need to access it reflects a more challenging fiscal scenario.
However, inflation continues to be below BCRP inflation target
Services, construction, and manufacturing remained key drags, while commerce gains partly contained the decline.
The gradual reopening of the economy aided self-employment.
Improvement of hours worked signals that the worst has likely passed
Further easing of mobility restrictions, along with added pension payouts would consolidate a retail-led recovery
we see upside risks to our forecast of a current account surplus of 0.6% of GDP for this year.
We expect the positive trend to consolidate with the easing of lockdowns in August and September
The manufacturing sector is driving the economic recovery
The recovery was driven mainly by the manufacturing sector
A split decision and capital flight concerns amid negative real interest rates suggest that the easing cycle likely ended.
Imports continued to contract as internal demand remained weak
Core goods inflation continues to be at a high level
Further monetary easing unlikely at least until the end of this year.
Still, retail sales are 12% below pre-outbreak levels
We forecast a GDP contraction of 12.7% this year
Our forecast for the primary fiscal deficit this year stands at 6.9% of GDP (from 0.4% in 2019),
Weak domestic demand in 2Q20 reflect the negative shock from COVID-19
Recovering, but still low terms-of-trade and dampened global activity mean Colombia’s external account imbalances would persist ahead
Despite the less pessimistic outlook, ample stimulus is set to remain in place
Headline inflation increased in August, in line with expectations and led by core items.
Natural and non-natural resources sectors are supporting the recovery.
We revised our forecast for the July monthly coincident indicator (ISE) to a decline of 9.2%, only a modest improvement from the 11.1% drop in June.
The manufacturing sector is the main driver of the recovery
The budget bill foresees a reduction of the consolidated fiscal deficit to 3.8% of GDP in 2021.
The budget bill aims to reduce the fiscal deficit to 4% of GDP in 2021, from an estimated 7% for this year.
Core goods inflation accelerated further
Optimistic oil production targets and GDP growth estimates risks missing fiscal targets
A wide output gap and relatively stable currency ought to limit price increases going forward
The economic reopening and oil price recovery will counter dampened domestic demand, preventing inflation falling significantly further
Signs that import dynamics are improving would contain further surplus widening
The central bank enters a wait-and-see mode, assessing the evolution of the economy while leaving the door open for further easing.
Argentina will seek an agreement with the IMF following a successful debt restructuring with private creditors.
Fiscal accounts deteriorate amid COVID-19 shock
The macroeconomic scenario evolvement continues to be determined by the development of Covid-19 and containment measures
Weak internal demand, recovering terms-of-trade, and a swifter global rebound will aid some further CAD narrowing
Headline inflation stood below the central bank target for twelfth consecutive month
Government bond purchases could be used to address liquidity issues, but not boost aggregate demand.
Improvements on the health front, along significant monetary and fiscal impulses, are contributing to the recovery.
As the mandatory quarantine was extended until the end of August, the labor market recovery is set to be gradual
The board is likely to evaluate how the economy progresses, while keeping the door ajar for further easing
With the economy reopening, cash transfers and pension withdrawals materializing, the activity recovery advancing.
Historic job losses, record low participation and reduced work hours are consistent with only a gradual activity recovery scenario
While two members advocated for further easing, other two seem more cautious
Manufacturing exports recovered at a faster pace than non-oil imports
Inflation forecasts increased for 2020
Still monthly GDP is far below pre-outbreak levels
Trade surplus widened in July, on weak imports.
Net portfolio flows and FDI deteriorated amid uncertainty surrounding the outbreak
Core goods CPI still growing above Banxico’s inflation target of 3%
Retail sales are still far below pre-covid levels in February
Higher public debt expected for 2020 amid weak GDP and large fiscal stimulus
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The lockdown hurt all sectors in 2Q20.
Activity is likely to gradually recovery ahead as the economy reopens and the fiscal stimulus reaches firms and consumers
Lower oil prices, weaker domestic demand and a mining export increase favored the trade balance in 2Q20
However, the economy is still far below pre-outbreak levels in February
Dynamics within the quarter are in line with a gradual recovery
With oil prices recovering, further narrowing of the trade deficit is likely ahead.
Downbeat private sentiment, still-low terms-of-trade, significant job losses and elevated uncertainty point to a gradual recovery process ahead
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We still expect the policy rate to reach 4.00% before the end of 2020
The recovery was driven mainly by the manufacturing sector
The monetary policy committee has started a process to change the monetary policy instrument.
We adjusted our GDP growth forecast down to -3.5%, from -2.6% in our previous scenario
Imports remain weak as domestic demand weakens and uncertainty restrict investments
Falling service prices reflective of weak domestic demand
Core goods CPI continues to grow above Banxico’s target of 3%
The door to further easing is not closed, but upcoming rate decisions are set to be more data-dependent
Contagion reaccelerated in Peru as the economy reopens
The next stop is a renegotiation with the IMF
The economic recovery will likely be curbed by policy uncertainty
May’s figures show a slower deterioration compared to last month
The unwinding of government measures and reopening of the economy would contain downside pressures.
An expansionary monetary policy stance is justified by the possibility of a 10% GDP contraction
As the country partially opens and the evolution of the coronavirus consolidates a favorable trend, an activity recovery is expected ahead
With some easing of lockdown measures unfolding, some gradual economic recovery is anticipated
We expect the policy rate to remain at 0.5% and a boost to the QE measures in response to any significant deterioration of conditions.
As we approach the end of the cycle, future moves would be dependent on how the recovery and inflation unfold
As economic weakness endures and lockdown measures gradually lift, the labor market is likely to remain weak
The MoF reduced its 2020 GDP forecast to -7.4%
Industrial sector was affected the most by COVID-19
The extension of the lockdown to the end of August hints at only a slow labor market recovery ahead
Hefty contraction of imports in 2Q20.
A slower recovery in imports relative to exports supported the improvement in the trade balance
Monthly GDP in May surprised to the downside
Core goods and gasoline prices exerted upward pressure to headline inflation
Expenditure increased in June, driven by social and energy subsidies.