Nelson Bocanegra

BOGOTA, (Reuters) – The economy of Colombia could have grown 7.5% by 2022’s first quarter compared with the same period last year. It was primarily fueled by domestic consumption. But, this trend will slow as inflationary pressures increase, as a Reuters poll showed on Friday.

According to 13 economists, economic growth was between 6% and 8.30% during the three-month period ending March 31, according to their estimates.

Latin America’s fourth-largest economic sector will grow at a slower pace if the growth rate is consistent with the poll’s median forecast 7.5%. This compares to the 10.8% growth in the quarter that ended Dec. 31.

David Cubides from stock brokerage Alianza said that “the good dynamics in domestic demand, high terms of trade, and expansionary monetary policy could have contributed towards growth during the first 3 months of 2022.”

“But looking forward to the next quarters, the rising inflation, tighter foreign financial conditions and the increasing monetary rate would cause growth to moderate slowly,” he said.

Analysts also predict that Andean countries’ gross domestic product will grow by 5.25 percent this year before slowing to 3% in 2023.

Colombia’s economic growth was historic at 10.6% last year, against a slow comparative period in 2020.

Partly, the forecast cooling can be explained by Colombia’s central banking decision to increase its benchmark rate. This has been raised totalling 425 basis point from September 2013 to 6%. That is its highest level since May 2017.

As a way to curb runaway inflation which reached 9.23% over the 12-month period to April (which is still well above the bank’s goal of 3%), the interest rates will be raised.

According to an average estimate of analysts, the central bank is expected to raise interest rates by 8.5% before the year ends.