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Barclays on Colombia/BanRep

COLOMBIA
  • Economic activity in Colombia maintains strong momentum. GDP grew 9.6% y/y in November, 1pp above market expectations (8.6%) and close to Barclays forecast (10%).
  • So far, no new major mobility restrictions have been announced and Barclays think the strong pace of the economy is likely to be sustained through 2022, driven by strong domestic demand, business confidence that remains high despite electoral uncertainty, and the possibility of a rebound in oil production.
  • These factors are likely to push Colombia to grow more than 6% in 2022 after having grown around 10% last year.
  • On the fiscal side, this is helping with consolidation. According to MoF data, central government debt remained stable last year, closing at 61.5% of GDP. The continuity of this strong growth in 2022 and the additional revenues that the government will receive next year from the tax reform approved in 2021 should bring the beginning of the reduction of debt levels forward.
  • On the monetary policy front, the strong growth supports their call for a 75bp hike in the reference rate on January 28.
  • Even if inflation in Colombia remains more contained than in LatAm peers, Barclays think Banrep is likely to accelerate the tightening pace to prevent a potential over-heating of the economy that could reinforce pressures in the current account as well as domestic prices.

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