International Monetary Fund warns risks of rising inflation in Colombia and the region

The International Monetary Fund (IMF) stated, in its most recent report in March 2022, that inflation has affected Latin America's largest economies, “which has led the central banks of countries in the region to raise the interest rate.” This is how the recently submitted report begins.

The IMF stated in its report entitled “Economic Outlook: The Americas”, that the increase in inflation in the region has been dizzying, “as it was below the average for other emerging economies. It is now higher, with a year-on-year average of 8% in October, and more than 10.5% in the case of Brazil,” said the international monetary cooperation fund.

Regarding the Colombian economy, the bank said that its growth was one of the most dynamic during the past year, “which is an indication that growth will continue this year,” the report notes.

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The IMF rescues that Colombia's economic boom will reach 5% in the coming months. “The risks to growth continue to slope downwards. While external risks remain high due to the intensification of the current invasion in Ukraine.”

While higher hydrocarbon prices may benefit Colombia, “rising and volatile international food and energy prices, as well as more persistent disruptions in global supply chains, would exacerbate domestic inflationary pressures,” the IMF warned.

In the case of Latin America, the entity says that the increase in inflation is due to an increase in food prices, which began to rise before the pandemic and have reached an average of 18% since January 2020.

The figures revealed by the entity would confirm that food consumption on the continent is a quarter of total household expenditure. “Households that are still recovering from the crisis caused by covid-19 and rising food prices leave them without additional resources to consume other goods.”

Latin America faces a latent risk. According to the entity, “international financial conditions could be tightened due to the impact of inflation on advanced economies and this would have the effect of capital outflows. This potential shock could jeopardize financial stability and depreciate currencies in Latin America, exacerbating inflationary pressures.”

Finally, the agency responsible for ensuring financial stability, facilitating international trade, promoting high employment, sustainable economic growth and reducing poverty, stated in the report that:

“Inflationary pressures must be temporary and inflation in the medium term is likely to return to the levels targeted by central banks. But there is great uncertainty. The shock of the pandemic is peculiar, and it is difficult to determine its impact on commodity prices, supply bottlenecks and rising transport costs,” added the IMF.

The inflation pattern contemplated in the agreement with the International Monetary Fund for calendar year 2022 is between 38% and 48%. According to Dane figures, food and non-alcoholic beverages increased by 25.37%, and specifically in food the increase was 26.30%, between April 2021 and March 2022.

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