After a strong global rebound from COVID in 2021, the war in Ukraine will contribute to a significant slowdown in global growth in 2022 while adding to inflation. According to the IMF’s World Economic Outlook (WEO), Global growth is projected to slow from 6.1% in 2021 to 3.6% in 2022 and 2023. Within this context, Colombia is expected to outperform many of its emerging market (EMs) peers and developed markets (DMs) in general. Below is our summary of the WEO data from April 2022.
AVERAGE GDP GROWTH 2022-2027
Due to war-induced reshuffling of commodity suppliers, EMs that are net energy/food exporters have seen their prospects improve. Southeast Asia (4.9%), Latin America (2.1%), and ME&A (3.4%) will exceed DMs (2.0%) average growth while Eastern Europe (1.1%) will get dragged down by the war. Colombia (3.9%) is an outlier in Latin America, with anticipated growth above average among EMs.
Source: World Economic Outlook – IMF- April 2022
AVERAGE INFLATION 2022-2027
Broadening price pressures that began in 2021, further worsened by war-induced commodity price increases, have led to 2022 inflation projections of 9.8% in EMs and 5.2% in DMs. However, inflation is expected to subside by 2023. Average 2022-2027 inflation in Southeast Asia (2.7%), Eastern Europe (10.3%), Latin America (3.6%), ME&A (2.6%), and DMs (2.6%) is expected to return to normal levels, with the exception of Turkey.
Source: World Economic Outlook – IMF- April 2022
AVERAGE GROSS DEBT (% GDP) 2022-2027
Covid-19 resulted in most economies increasing their Debt-to-GDP levels by 10-20%. Debt-to-GDP is expected to remain much lower in EMs than DMs. Colombia’s Debt-to-GDP, which reached 66% in 2020, will be among only a handful of countries, and the only one in Latin America, whose Debt-to-GDP will be lower in 2027 (52%) than pre-pandemic.
Source: World Economic Outlook – IMF- April 2022
AVERAGE FISCAL DEFICIT (% GDP) 2022-2027
Both DMs and EMs saw a hike in their fiscal deficits while they countered the effects of the pandemic. EMs (3.2%) are expected to have fiscal deficits below that of DMs (3.8%) between 2022 and 2027. Colombia’s deficit of 2.3% will improve and finish 2027 at 1.2%.
Source: World Economic Outlook – IMF- April 2022
AVERAGE CURRENT ACCOUNT BALANCE (% GDP) 2022-2027
EMs with excess current account deficits will continue to experience weak currencies. Colombia’s current account deficit is a drag on its currency, even though the currency is considered undervalued.
Source: World Economic Outlook – IMF- April 2022
CAGR WORKING AGE POPULATION 2022-2030
Working age population is expected to grow in ME&A as well as in Latin America, while shrinking in Eastern Europe and most DMs. This age group is projected to continue to increase in immigration friendly countries like Canada, US and UK. Colombia’s positive working age population growth bodes well for consumer spending and real estate.
Source: OECD Stats - October 2021
Comments