Key Takeaways
- The economy is reaching pre-pandemic levels of activity sooner than expected as the government lifts restrictions and its vaccination plan advances. The central bank expects the output gap to close by mid-2022.
- Inflation should close 2021 around 5% y/y and indexation effects would extend the current temporary shock. In 2022, inflation is expected to end the year at ~3.7% y/y.
- The central bank has started its hiking cycle. The hawkish side of the BanRep Board has said that the hiking cycle should be faster at the beginning to avoid a more contractionary stance in the future. We expect BanRep to reach the nominal neutral rate of 5% by December 2022.
- Despite positive macroeconomic news and a better fiscal outlook, local asset prices remain volatile. Election campaigns could put further pressure on local markets in 2022.
In Q3-2021, Colombia probably reached pre-pandemic production levels. BanRep expects the output gap to be closed by mid-2022.
Despite supply shocks being temporary, indexation should extend CPI inflation. Reversion in headline inflation should start in the H2-2022, while core inflation should remain within the target range.
Economic recovery and the asymmetric impact of international prices for exports and imports are together widening the current account deficit. Financing is still sufficient, but FDI recovery is crucial.
The central bank has started a more aggressive-than-normal hiking cycle and the neutral rate should be reached in 2022. The IBR market is pricing an even higher terminal rate that would be achieved sooner.
Divergences in monetary policy cycles and the electoral calendar could keep the COP under pressure.
The main phase of the presidential election starts early in 2022. The Congressional elections are the first milestone.
Currently, there are 42 potential presidential candidates. The undecided population leads the polls.
Elections don’t have a certain effect on the exchange rate.
After the shock due to fiscal uncertainty, the long end of the curve has been relatively affected by the local and external environment. Monetary policy is driving movements in the short end and the belly of the curve.
In YTD terms, offshore investors remain the main buyers of COLTES. Positioning on the long end of the linkers curve is gaining momentum.
Macroeconomic Forecasts
Este informe ha sido preparado por Scotiabank Colpatria S.A. establecimiento bancario. Las opiniones, estimados y proyecciones contenidas, corresponden a la fecha de divulgación y se encuentran sujetos a cambios sin previo aviso, pues atienden al comportamiento de la economía y el entorno. Los datos expuestos en el documento provienen de fuentes públicas consideradas fidedignas, sin embargo Scotiabank Colpatria S.A. no se hace responsable de su veracidad ni de la interpretación que de los mismos se haga. Este documento no es ni pretende brindar asesoría de inversión; la información, herramientas y material contenido en el texto, son proporcionados meramente con fines informativos y no deben ser utilizados ni entendidos como una oferta, consejo, asesoría o recomendación de inversión ni para comprar, vender o emitir valores y/o cualquier otro instrumento financiero, ni para realizar cualquier otro tipo de transacción financiera. El contenido de la presente comunicación o mensaje no constituye una recomendación profesional para realizar inversiones en los términos del artículo 2.40.1.1.2 del Decreto 2555 de 2010 o las normas que lo modifiquen, sustituyan o complementen.
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