Analysts see Colombia’s 2020 inflation below central bank target

A man buys vegetables and fruits in Cali, Colombia

Analyst expectations for Colombia’s inflation in 2020 fell below the targeted figure for the first time in six years, due to lower demand as the coronavirus pandemic chokes the economy.

According to the median of those surveyed, inflation will rise 2.74% this year, below the 3.4% estimated in a survey in April and under the central bank’s 3% target.

If inflation falls in line with the survey, it will represent the lowest level of annual inflation since 2013 and the second-lowest for more than 65 years.

“Our estimate is in response to bearish factors such as weak demand, which has led to a re-adjustment of consumer spending geared towards essential goods, leaving behind items such as entertainment or durable goods,” said Banco de Bogota analyst Gustavo Acero.

“The relative stability in some public services and in rents also supports the downward bias in our inflation expectations for the end of the year,” he added.

In May alone, Latin America’s fourth-largest economy is expected to report inflation of 0.09%, which would drop the 12-month figure to 3.28%, down from the 3.51% reported in April.

Inflation expectations for 2021 were held in line with last month’s survey at 3%.

Falling inflation would continue to play to the favor of the central bank’s plan to further cut the benchmark interest rate – currently at 3.25% – in a move to alleviate financial costs of as the economy collapses.

The ministry of finance has forecast an economic contraction of 5.5% for this year.

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