Colombia’s economy is forecast to grow 1.8% in 2024, while inflation is expected to slow to 5%, paving the way for the central bank to cut its benchmark interest rate to some 8%, Finance Minister Ricardo Bonilla said on Thursday.

GDP growth for 2023 is expected to have reached 1.2%, he added, lower than the minister’s previous forecast of 1.8% late last year.
Latin America’s fourth-largest economy sputtered through the previous year, while inflation has remained persistently high, hitting 10.15% for the 12 months through November.

“We expect … that the path of economic growth in 2024 hits 1.8%, which is to say that gradually we are emerging from this global slowdown,” Bonilla said during an interview in capital Bogota.

Inflation for the end of 2023 is expected to come in at around 9.5%, Bonilla said, a significant drop from the 13.12% recorded in 2022 but significantly greater than the central bank’s 3% target.

A Reuters poll last week revealed that analysts expect inflation in 2023 to have reached 9.43%.

“That inflation continues to decline slowly but surely means we won’t reach the (central) bank’s 3% goal in 2024; it will be reached in 2025,” Bonilla said.

Lower inflation would allow the central bank to cut the benchmark interest rate from its current 13%.

The government will hold talks with business leaders over President Gustavo Petro’s proposal to make changes to a fiscal reform – passed early last year – to shift tax burdens away from companies and onto wealthy individuals, Bonilla said.

“We’re going to start a process of socialization with economic players, business associations etcetera,” the minister said, adding that any proposed changes would be sent to Congress for approval.

Since passing the initial fiscal reform at the start of 2023, Petro’s government has struggled to push through a trio of subsequent projects to reform health, pensions, and work.

Colombia’s government is only opening discussions concerning the fiscal rule – imposing limits on the fiscal deficit – which does not guarantee changes or plans to breach it, Bonilla said. The fiscal deficit goal for 2023 was 4.3% of GDP.