As the second half of 2024 progresses and the balance sheets for the period between January and June are available, financial analysis teams and research centers are beginning to prepare their projections for what will come in the second half of the year on issues such as GDP, tax collection, geopolitical influences, the labor market and other macroeconomic aspects; in which it can be seen that optimism remains solid.
In recent days, projections from Banco Itaú, BBVA Research and Credicorp Capital were released; they stated that although the country is currently facing great challenges due to the slowdown, the bad streak is about to end and the path of growth could be resumed without any problem before the end of the year. but by implementing a recovery plan as soon as possible and stopping uncertainty.
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For these experts, aspects such as the fall in inflation and a possible easing of monetary policy would encourage consumption among Colombians in the coming months, thereby giving the economy a break. This is without taking into account that some banks have already begun to lower their rates on housing loans, in order to reactivate industry and construction, two sectors that are not doing well.
Recession
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Cautious cuts
First of all, for Banco Itaú, in addition to what has already been mentioned, the presidential elections In the United States, the reduction of the local monetary policy rate, the legislative agenda and tax collection will be crucial factors for the local economy, since some tailwinds could come from there.
Carolina Monzón, Economic Research Manager at this bank in Colombia, indicated that “this year the Colombian economy will close with a growth of 1.4% compared to 2023 (figure revised from 1.2%), supported by a future improvement in inflation levels, which in turn would give the Issuer more room to maneuver to lower the monetary policy rate to 8.75% at the end of the year (currently at 11.25%).”
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In this way, he adds that the Bank of the Republic will make cautious cuts in its monetary policy rate in the second half of 2024, starting with reductions of 50 basis points in July and September, followed by cuts of 75 basis points in October and December, although it warns that inflation will continue to play an important role.
“The Colombian peso is expected to remain between $3,900 and $4,200, influenced by factors such as inflation in the US, decisions by the FED and international events. Volatility could increase depending on the global economic situation. A steepening of the yield curve in pesos is also foreseen, with an expectation of accumulated cuts in the monetary policy rate of up to 750 basis points,” concluded Monzón.
The outlook is for global GDP to gradually increase by an average of 2.7% between 2025 and 2026.
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Demand response
BBVA Research also entered into the forecasts on what is coming in the macro panorama for Colombia, an entity that focused its attention on demand, an aspect that will play a fundamental role in the coming months, since for them Conditions are being created that will help household purchasing power to recover.
“Households will accelerate their spending on goods, while spending on services will moderate. Better financial conditions will support spending. Domestic demand will accelerate strongly next year, also thanks to the presence of more housing inventories under construction,” they said.
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These analysts added that the investment will take place in three stages during the remainder of the year.. One in the short term, in which civil works will remain in positive territory and the better consumption of goods will boost industrial production and spending on machinery; while for the closing months they project that non-residential construction will take advantage of the low commercial vacancy and finally, the better housing sales this year will boost construction in 2025.
“In 2024, public spending on health will lead the government sector to lead growth. Likewise, public services will stand out. On the other hand, construction will show some recovery, but still in slightly negative territory. The slow pace in this sector will condition the demand for minerals and related industrial products, impacting these sectors,” they indicated.
Fiscal noise
Although things look set to improve in the future, Credicorp Capital warns that there are concerns in the market, which require urgent attention so that this does not lead to new falls in investment, as has been seen so far. In this sense, they state that it is necessary respect the fiscal rule, strengthen tax collection and strengthen budget execution.
Ricardo Bonilla, Minister of Finance and Public Credit
Mauricio Moreno / Portfolio
“Since the fourth quarter of 2023, we had expected an increase in fiscal noise this year, given the Government’s goal of executing the highest level of primary spending in history (around 20% of GDP, similar to 2020 during the pandemic) and clear risks on the revenue side due to slow economic growth and assumptions of high revenues from uncertain sources (i.e., tax litigation and evasion). In fact, over the last few weeks, fiscal noise has increased following relevant developments,” they noted.
However, they project that the economy will grow by 1.8% this year and that the conditions The financial situation will stabilise, and this is a point on which the Government should focus, avoiding further fueling of uncertainty and ending any type of speculation regarding the country’s fiscal future.
“Although we do not rule out new episodes of appreciation pressures on the Colombian peso in the coming months once the recent momentum subsides, the rate differential remains high, oil prices remain high and, more importantly, the first Fed cut is approaching. We continue to think that potential episodes of appreciation are an opportunity to buy the US dollar,” they concluded.
Thus, these analysts concluded by making it clear that factors such as the increase in political and regulatory uncertainty, fiscal concerns and the expectation of stronger rate cuts by BanRep will be decisive factors for the country, since although growth is projected, in the In the best case scenario, it would only reach 2%, which would be insufficient for significant development.
