The constant calls to the Government to spend less, the shortfalls in the General Budget of the Nation, the fall in tax collection and the possibility that the country’s risk rating will continue to fall in the medium and long term, They are generating an environment of uncertainty among Colombians regarding the future of the economy.
This was evidenced in a recent report by Bancolombia Investigations.which updated its Economic Perception Index (EPI) for the fourth quarter of 2024 and the full year and left as its main conclusion that although things are improving in economic matters, these advances are not perceived due to uncertainty.
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“Our economic perception indicator marked a new minimum in the last quarter of 2024, such that it registered a -2.3% standard deviation in the series adjusted for seasonal effect, which is the lowest figure since 2011 (year in that started the series). This result, which is lower than the levels observed during the pandemic, reflects a relevant deterioration in the sentiment of economic analysts in their reports,” they reported.
Analysts also noted that the annual average for 2024 reached a level of -1.5% in their original series, which means a drop of -0.8% compared to 2023, when the average was -0.7% in standard deviation.
Economic recession
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distant looks
Bancolombia data is made up of two parts. With one, the polarity of economic sentiment is measured and arises from a sentiment analysis methodology in text of multiple reports that allows us to characterize how positive or negative the tone of analysis of the situation and macroeconomic perspective in the local market is.
For this case, the results show that the polarity index was the one that most drove the deterioration, with a negative balance in the fourth quarter of -2.9%, which for them reflects an increasingly pronounced pessimistic sentiment in the reports of economic analysts.
“The 2024 average also turns out to be the lowest since 2011, which was especially explained by a negative bias in local reports on the economic situation for Colombia,” they noted.
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Meanwhile, the second indicator is the volatility of the projections, which is calculated from the standard deviation of the projections of the economic variables included in the expectations survey of the Bank of the Republic.
“The volatility indicator showed a slight improvement and fell to -0.1% in 4Q24 (0.0 in 3Q24). This value, not observed since March 2020, before the pandemic volatility, represents progress compared to recent years and suggests greater certainty in the expectations of the Banco de la República survey,” they added.
External debt
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Based on this, for Bancolombia the results of both sub-indicators reflect the two realities that the Colombian economy currently faces, in which, on the one hand, lower volatility confirms the recovery of economic growth observed in 2024, consolidating progress towards potential growth, which has gone hand in hand with the disinflation and lower interest rates.
“This transition, which affects the main variables, reflects a more stable economic scenario, which has allowed more aligned projections by analysts. On the other hand, the sentiment analysis of the reports, especially in Spanish, shows a greater deterioration related to fiscal uncertainty,” they highlighted.
These analysts closed by recalling that tax collection has remained weak and the Government’s income expectations seem very optimistic and implausible, which at the same time poses risks due to excessively high spending, due to which, the IPE will continue to be exposed to the risks derived from fiscal uncertainty and to the advancement of local fundamental economic indicators.
