Key Economic Challenges Shaping Colombia in 2024

The Colombian American Chamber of Commerce, AmCham, has released its inaugural report for the year, entitled “2024: A Year of Complexities”. The report offers an assessment of the economic challenges looming for the country and outlines key areas for focus to navigate the ongoing economic slowdown.

AmCham’s president, Maria Claudia Lacouture, emphasized the complexity of 2024 across economic, political, social, and business landscapes. The need for careful management and prudence is highlighted to strengthen the country’s image and alleviate the prevailing uncertainty that has persisted for several months.

Four key economic scenarios

Lacouture identified four major scenarios that will shape Colombia’s trajectory in 2024, with the aim of guiding businesses to make informed, strategic decisions focused on reactivation and long-term viability.

Uncertainty surrounding reforms: The report underscores the uncertainty arising from ongoing reforms, including those in labor, healthcare, and pensions. These changes are expected to impact corporate finances, alter service models, and influence the future of Colombians. The uncertainty may lead investors to pause or reconsider their investment and expansion decisions in the country.

Economic adjustment post-pandemic: Following the post-pandemic growth rebound, an economic adjustment period is anticipated. Analysts predict a modest growth rate of 1.2% to 1.5% in 2024. This adjustment will ground expectations in terms of economic growth and prompt a reevaluation of investment strategies.

Inflation concerns and employment challenges: The report highlights the significance of the Consumer Price Index (CPI) in macroeconomic policy. Despite a slight easing of inflation towards the end of 2023, the reduction is not as rapid as desired, particularly for those with lower incomes. The persistently high prices, especially in food and fuel, significantly impact household finances. Additionally, the economic slowdown is expected to result in a rise in the unemployment rate, reaching an estimated 10.3% in 2024, adding pressure to the overall economic context.

Commercial challenges amidst security concerns: Two prominent challenges affecting commerce are roadblocks, increasing costs that eventually translate to higher consumer prices, and escalating incidents of violence and extortion, particularly during discussions between the government and the ELN rebel group.

Costs are expected to remain elevated, at least in the first half of 2024. Analysts anticipate a potential reduction in interest rates by the Banco de la Republica starting from the second quarter of next year. These high-interest rates have been implemented as a measure to control spending and inflation.