Recovering domestic demand is restraining the pace of the trade correction
Negotiations with Congress are likely to yield a watered-down version of the bill.
The cost of signaling rate hikes only in 2022 is low given adverse short-term dynamics.
The anti-inflationary toolkit is reduced to tighter controls, with an eye on the October legislative election.
We expect the Colombian economy to bounce back with growth of 5.0% this year, after shrinking 6.8% in 2020
The monthly GDP was less affected than expected by the retightening of social distancing measures.
We have adjusted our GDP forecast for this year down to 3.5%, from 4% previously.
Vaccination is progressing, although cases are peaking.
Macroeconomic policies will likely lead to increased distortions
A global supply disruption of semiconductors and temporary gas shortages affected manufacturing output
Polls suggest six candidates could slip through in the first two places and then participate in the second round
A structural tax reform is a key prerequisite to maintain investment grade rating
Core annual inflation also accelerated.
The majority of Board members considered this is not the end of the easing cycle
Inflationary pressures remain contained amid significant slack in the economy
The benign external environment would be partially countered by improving domestic demand and higher oil prices
Still, internal demand indicators remain below pre-outbreak levels
Limited inflationary pressures will favor maintaining a significant monetary stimulus in place
Strong fundamentals support growth of 6.5% this year.
Sequential gains remain in line with a gradual recovery scenario
Improved economic outlook and higher oil prices support fiscal accounts but weak oil production is still a risk
A transitory deterioration of labor market indicators is expected in March amid renewed quarantine measures.
We now expect the tightening cycle to begin in 4Q21.
The reintroduction of mobility restriction in March would likely result in another transitory loosening of the labor market.
We forecast GDP growth of 6.0% for 2021, largely driven by a high statistical carryover (5.0%).
The central bank is downplaying market expectations of rate hikes later this year.
We expect higher commodity prices and import controls to boost the trade surplus this year
Our baseline scenario considers stable rates at 1.75% for this year, but risks lean to an earlier lift-off
We expect the trade surplus to narrow slightly in 2021 relative to 2020
Odds of further easing are low.
Manufacturing output and services sector are a temporary drag to activity
The retightening of social distancing measures affected retail sales
Energy prices exerted upward pressure.
We forecast GDP growth of 6.0% for 2021.
Tax collection increased in real terms in the quarter ended in February, led by higher export taxes
External demand is the main driver of the recovery
Drivers for growth are positive, but new lockdowns and the fading effect from pension withdrawals will be short-term drags ahead.
With restrictions lifted and business sentiment improving, imports are expected to resume their recovery path
A flexible exchange rate, the domestic demand slump, and favorable terms of trade led to a 1.4% of GDP surplus in 2020.
We see downside risks to our 3% GDP growth forecast.
With most restrictions lifted in February, the activity hiccup is expected to be transitory
Downside risks to our 4% GDP growth projection
Worldwide temporary shortage of semiconductors is likely affecting manufacturing output
The agreement with the IMF looks increasingly distant
Fiscal consolidation is the key macro risk to monitor in the near term
More populist measures emerged from Congress as general elections near
Core inflation stood practically unchanged.
With the economic recovery advancing, to be further aided by surging oil prices, additional rate cuts are unlikely
Inflationary pressures moderated and core inflation remains at historical lows.
The wide balance came despite imports gaining momentum at the margin.
A negative base effect (Mexico’s black Friday) affected sequential private consumption.
The central bank also expects a better economic outlook for 2021 and 2022.
We see stability for the CAD at (a wide) 3.4% of GDP this year
A pesar de la contracción interanual, mejoras secuenciales persistentes son un buen augurio para las perspectivas de recuperación.
Inflation remains above the BCRP’s central target of 2%
The economic reopening since January would bolster employment dynamics
U.S. economic strong recovery and a soft internal demand will support the trade surplus in 2021
A still fragile labor market was shaken by the new round of mobility restrictions.
IMACEC would contract 2% YoY in January.
External demand is benefiting the recovery
We forecast a trade surplus of USD 17 billion for 2021, up from USD 12.5 billion in 2020
Trade balance was supported by a strong recovery in external demand, poor internal demand and a weak currency
Tightening of external financial conditions likely to limit further easing
Annual core inflation remained persistent
We forecast GDP growth of 5.5% for 2021.
The deterioration reflects tighter social distancing measures and a negative base effect
We forecast a reduction in the primary fiscal deficit to 4.5% of GDP this year.
Final domestic demand was supported by easing of distancing measures and fiscal stimulus
For 2021, we estimate growth of 4% due to the normalization of activities.
We expect a weak labor market to reinforce disinflation this year.
The positive impact of monetary stimulus, the vaccination program, and higher oil prices would aid an activity bounce back this year
We expect a GDP contraction of 4.4% in 4Q20.
Warning sign for the government as it seeks to reduce inflation, with an eye on the legislative election.
Industrial production is closer to pre-pandemic levels driven by external demand
Elevated risks and changes at the board make the path for rates less certain.
We expect further easing over the next two meetings
With signs that the worst of the crisis has passed, more dedication towards the medium-term challenges would be required
The vaccination campaign started
The government will likely try to preserve the current precarious macro equilibrium.
Inflation was driven mainly by an increase in energy prices
The anticipated domestic economic recovery and increasing income deficit would be contained by high copper prices this year.
With output gap still wide, similar inflation dynamics are likely to persist for most of the year.
Limited core price increases continue to contain headline inflation.
However, internal demand indicators remain far below pre-pandemic levels
The technical staff sees a rate path somewhat below the median analyst outlook and the previous report’s implied path.
The headline inflation figure was driven by higher energy and food prices
Statistical carryover to aid robust growth bounce back this year
Public debt increased in 2020 due to a lower GDP base effect
In spite of the split vote, there is consensus within the board that the monetary policy stance must remain expansionary.
Moderating labor market gains come amid renewed health restrictions
The GDP proxy would contract 3.5% in December
Urban labor dynamics deteriorated as mobility restrictions were renewed.
GDP likely fell by 8.5% in 2020
We expect the trade surplus to narrow gradually in 2021 relative to 2020
Unanimous support to continue to signal low-for-long rates
Further easing of distancing measures and the “Buen Fin” boosted retail sales.
.We expect higher soy prices to boost the trade surplus this year.
We revised our GDP forecast for 2020 to -10% from -10.5%, given the better-than-expected performance in the final months of last year.
Higher energy prices and persistent core inflation were the main drivers
The size of the fiscal consolidation for this year is likely to be discussed with the IMF.
Milder import declines suggest a gradual domestic demand recovery
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