Colombia Ended 2023 with an Inflation Rate of 9.28%

Colombia ended 2023 with inflation of 9.28%, an even better result than the government had announced, which was betting on a CPI of 9.5%. This means a decrease of 3.84 percentage points compared to 2022 when the figure reached 13.12. With this balance, it is expected that the central bank will continue with the path initiated in December to progressively reduce the interest rate, which would facilitate economic activity, very punished during the past year by the high prices. Food and non-alcoholic beverages; clothing and footwear; recreation and culture; household goods and services were the divisions that most drove the decline.

According to the report of the National Administrative Department of Statistics (DANE), transportation; restaurants and hotels; alcoholic beverages and tobacco; education; miscellaneous goods and services were the most inflationary sections.

Gasoline prices drive inflation

Among the most inflationary items is transportation, clearly due to the increase in the price of gasoline, agreed by the government throughout 2023, with scheduled increases, as the state has stopped subsidizing this type of fuel. For the technical director of DANE, Andrea Ramirez, “when we consider that the CPI is 9.28%, and look at how many percentage points each of these spending divisions contribute, we see that housing, water and electricity and gas contribute the most with 2.84%, while rents and electricity contribute highly, followed by transportation with 1.96%, where we obviously see the result of the month to month increase in the price of gasoline”.

Ramirez wanted to highlight the drop in the price of food and non-alcoholic beverages, a section that directly affects the pocket of Colombian families, which has had a significantly less inflationary behavior than the average. “Unlike what has happened in other years and taking into account the whole trend we have had during the year with the food issue, food only reports an annual variation of 5.23% well below what we see with total annual CPI,” remarked the technical director of DANE.

Geographically, the Atlantic coast cities of Valledupar, Santa Marta and Monteria are the most inflationary capitals. On the other hand, Villavicencio, Ibagué and Popayán are where the Consumer Price Index has grown the least.

Government highlights “the right path”

Once these results were known, the Minister of Finance, Ricardo Bonilla, highlighted that the inflation data for 2023 “means that the increase in the minimum wage was CPI plus 2.9%, a good adjustment, moderate, and which allows us to continue on the path of decreasing inflation in 2024”.

For Bonilla, there are still pending issues such as electricity costs, the possibility of the El Niño phenomenon and the management of the Tariff Option, “which are factors that are hitting us hard on inflation”. The Tariff Option allows moderating abrupt tariff increases through the accumulation of balances that are paid by the user later over a longer period of time.

On the subject of fuels, the Minister pointed out that the increases for gasoline have already been closed. In this sense, only the adjustment in diesel, a fuel that will also cease to be subsidized by the State and will have to be progressively adjusted to the international market price during 2024, remains to be made.

The minister added that this inflationary result “shows that we have controlled the process in food and other goods, we have de-indexed a good part of the indicators of the economy, it means that we are on the right track and we can expect that at the end of 2024 we can expect an inflation below 5% and that with that inflation the intervention rate of the Bank of the Republic will continue to decrease”.

It should be recalled that the government and the economic authorities are working with an inflationary horizon of 3% for 2025, and that the CPI by the end of this year would be above 5%, according to Minister Bonilla’s forecasts.