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COLOMBIA: BBVA Sees BanRep Cutting To 6.5% Next Year

COLOMBIA
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  • BBVA expects GDP to rise by 2.5% in 2025, driven by private consumption and fixed investment in infrastructure, machinery, and housing. They expect fixed investment to grow by 3.9%, led by civil works and machinery, while residential construction recovers from the middle of the year. Private consumption will grow by 3.1%, driven by durable and semi-durable goods.
  • Inflation will moderate to 3.6% next year, in their view. They expect the central bank to remain cautious in its approach to rate cuts next year, but for it to reduce the policy rate to 6.5%, as inflation converges to target, ensuring better financial conditions to support the economic recovery. BBVA then expects the policy rate to remain at that level for some time.
  • Despite efforts to curb spending amid lower-than-expected revenues, BBVA expects government expenditure will remain high throughout 2025-2026. They see the fiscal deficit coming in at 4.7% of GDP next year, down from an estimated 5.6% this year. They also expect the peso to remain weak, with their 2025 year-end USDCOP forecast sitting at 4345, marginally above their 4320 year-end estimate for this year.
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  • BBVA expects GDP to rise by 2.5% in 2025, driven by private consumption and fixed investment in infrastructure, machinery, and housing. They expect fixed investment to grow by 3.9%, led by civil works and machinery, while residential construction recovers from the middle of the year. Private consumption will grow by 3.1%, driven by durable and semi-durable goods.
  • Inflation will moderate to 3.6% next year, in their view. They expect the central bank to remain cautious in its approach to rate cuts next year, but for it to reduce the policy rate to 6.5%, as inflation converges to target, ensuring better financial conditions to support the economic recovery. BBVA then expects the policy rate to remain at that level for some time.
  • Despite efforts to curb spending amid lower-than-expected revenues, BBVA expects government expenditure will remain high throughout 2025-2026. They see the fiscal deficit coming in at 4.7% of GDP next year, down from an estimated 5.6% this year. They also expect the peso to remain weak, with their 2025 year-end USDCOP forecast sitting at 4345, marginally above their 4320 year-end estimate for this year.