The monetary policy report that the Bank of the Republic will present today indicates that total annual inflation to the consumer in 2025 would continue to converge towards the goal in the forecast horizon, although it would do it more slowly of the provisions of the previous report of October 2024 due, mainly, to greater pressures of labor costs.
Therefore, by the end of 2025 total inflation is projected in 4.1% (before estimated at 3.1%) compared to the 5.2% with which it closed in 2024 and Basic inflation in 3.9% (previously projected of 3%), figures similar to those expected by market analysts.
The report emphasizes that projections continue to face high uncertainty, mainly associated with The future behavior of the exchange rate, with possible increases in tariffs in global trade, with supply shocks that affect the price of food, with the adjustments in the prices of some regulated goods and services, and with the increase in the minimum wage by 2025, among others.
Faced with the estimated in October, the highest inflation reduction at the end of 2024 was due to food prices (3.3%), which increased less than projected, made by a better offer of the perishable group. The consumer price index (CPI) of regulated (7.3%) registered an important slowdown, although less than the forecast, due to higher increases in the prices of gas and electricity services. Inflation without food or regulated (5.2%) was reduced, in line with the estimated, due to the behavior of the group of services, which registered descents in the annual variations of the prices of the leases and education, which were partially compensated by the increases in the tourism services and the buildings administration.
The economy
The report mentions that economic activity would continue to accelerate on the forecast horizon, although at a slower pace than the expected in the October 2024 report.
Faced with the estimated, the annual growth of the gross domestic product (GDP) for the third quarter was lower (2% vs. 2.4%), due to a more negative contribution of the associated external commercial balance, mainly, with a Best import dynamics. The growth of domestic demand was greater than estimated (3.9 % vs. 3.3 %) And he completed four quarters with increases at his level, explained by the behavior of private consumption and, to a lesser extent, by the dynamics of gross fixed capital formation (FBCF).
For its part, the weak behavior of public consumption would have mainly occurred due to lower payments of government subsidies for electric power consumption, associated with lower demand from homes.
According to the monetary policy report, the figures available for economic activity for the fourth quarter suggest that the economy would have grown at an annual rate of 2.3%. This forecast indicates that at the end of the year domestic demand would have continued to accelerate (4.1%) due to the high growths estimated at FBCF (5.7%), From its low levels observed a year ago, driven by spending on machinery and equipment and the construction of civil works, and despite the low increases in consumption (1.4%).
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The report mentions that the estimated economic growth by 2024 is estimated at 1.8%, compared to 1.9% of the previous report.
In 2025 and 2026 the levels of economic activity will continue to recover, in an environment of an external and internal monetary policy less contractive, but the latter compatible with the convergence of inflation to the goal of 3%. By 2025 GDP would grow 2.6% (compared to 2.9% estimated in October), and 3.4% in 2026.
Holman Rodríguez
