Editorial, EL ESPECTADOR, July 20, 2024
https://www.elespectador.com/opinion/editorial/algunas-buenas-noticias-economicas/
(Translated by Eunice Gibson, CSN Volunteer Translator)
Three economic data points invite cautious economic optimism, but there are also warning signs in Colombia. The reduction in the interest rate by the Bank of the Republic, the decrease in income poverty, and the growth of the economy show that the country is continuing on the path to recovery after the difficult years of the pandemic. This is not to celebrate too soon, or to ignore persisting concerns, but it is a good time to recognize the Finance Ministry’s macroeconomic discipline, and to hope that the situation will continue to improve in the coming months.
Let’s start with what might be the least encouraging. In June, inflation increased by .28%, staying at an annual rate of 7.18%. That means that it’s stable, not desirable when the goal is to reduce it, but in any case, it signals an economy in the process of stabilization. Food prices had an annual variation of 5.3%, and the cost of services continued high, with a variation of 7.9%. Those are two large sectors that have to be part of the national government’s obsession. However, the experts expect inflation to continue to be reduced in what remains of this year, if the country continues working effectively on this effort.
The foregoing takes us to the Bank of the Republic. After months of timidity and necessary caution, the Issuer is sending signals of confidence in the economy. Thus, it lowered the interest rate in its monetary policy to 11.25%, a reduction of 50 points. In its message of explanation to the media, the Bank said that “after registering a .9% increase in GDP in the first quarter, which surpassed the estimates by the Bank’s technical team (.3%), indicators for the second quarter suggest that the economy is continuing its trajectory of recovery.” That means we are going in the right direction and reaching our inflation objectives by the middle of the coming year is not too much to be talking about.
To complete the panorama, the country received some good indicators recently. According to the National Administrative Department of Statistics (DANE in Spanish) the economy grew 2.4 points in May as compared to 2023. In addition, between 2021 and 2023, income poverty dropped from 39.7% to 33%. Just between 2022 and 2023, 1.6 million Colombians rose out of poverty.
All of this indicates that the judicious management of the economy is bearing fruit, in spite of temptations felt in the President’s Office, hearing calls for populism. The administration has something to brag about, and its frustration with the slowness of the Bank of the Republic to lower interest rates is understandable. Nevertheless, inflation continues to be elevated, which suggests not taking any irresponsible measures. In terms of economic reactivation, there are sectors that continue to need support, such as manufacturing and construction. The adjusted cabinet has to consider those necessities, and the fact that there are only two more years left in the Petro administration. Without much maneuvering room, there are several unpaid bills on the table. It’s not a time to be in a rush, but rather to build on what has been accomplished.