The analysis of projections of the main macroeconomic variables is relevant for understanding the direction of a country’s economy. Forecasts related to economic activity, inflation and monetary policy interest rates not only anticipate their behavior in the coming months or quarters, but also consolidate expectations about the dynamics of the economy in the medium term..
This blog compares ANIF’s projections for these three key macroeconomic variables with those recently published by Banco de la República. In terms of economic activity, the economy is expected to resume its growth path after having only grown 0.6% in 2023. In the Bank of the Republic’s October Monetary Policy Report, the Bank projects that the country’s GDP will grow 1.9% in 2024 and 2.9% in 2025 (Graph 1). The Bank highlights that economic activity will be driven by an increase in private consumption and expansion in investment, mainly in the construction sector, as well as by the recovery of consumption after the pandemic. In line with the Bank’s expectations, although with a slightly more conservative stance, ANIF projects growth of 1.8% for 2024 and 2.6% for 2025. This growth would be driven mainly by the performance of the agriculture and arts sectors in 2024, along with a recovery in industry and construction expected in 2025.
In terms of inflation, the performance of the CPI has been surprising in recent months. Economic prices have shown a lower growth than anticipated, leading to an annual inflation rate of 5.4% in October 2024. In its latest revision, Banco de la República reported a revision of the inflation projection, placing it at 5.3% for the end of the year (vs. 5.7% previously) and at 3.1% for 2025 (vs. 3.0%). Given the significant deceleration of prices in recent months, ANIF also revised down its projection, and anticipates that inflation will close 2024 at 5.0% and 2025 at 3.8% (Graph 2).
In terms of the monetary policy interest rate, the expectation of Banco de la República, the interest rate would reach 9.25% at the end of this year and would continue its downward trend towards 6.25% by 2025. For 2024, ANIF’s projection is also 9.25% but for 2025 it forecasts a closing rate of 6.75%.
The contrast between Banco de la República’s and ANIF’s macroeconomic projections reveals differences in economic activity and inflation in 2025. Banco de la República is slightly more optimistic regarding GDP growth and inflation convergence to the target. ANIF is a bit more conservative, considering some risk factors that could limit the economic recovery and inflation convergence to the target.
Source:
- Comentario Económico ANIF, 21st November, 2024
