INFLATION: Same as last year.
The cards have already been dealt for 2008. Nothing more can be done. The inflation goal will not be met for the third consecutive year. It will be at around 7.5 percent, predicts José Darío Uribe, the head of the Banco de la República. Nonetheless, 2009 could be different. The slower growth in demand, the recent reduction in international prices of basic products and the slowing down of the economy will generate a gradual reduction in inflation. Analysts predict an inflation rate of around 5 percent. This week the Banco de la República will set its new inflation goal for 2009. It is probable that the same rate from this year will be repeated, between 3.5 and 4.5 percent.
THE DOLLAR: On top again
In four months the Colombian peso has been devalued 50 percent. That hasn’t happened since 1985. The exchange rate was at $1,630 pesos per dollar in July and is now above $2,300. Next year, analysts expect that the devaluation will be maintained, because of the dollar’s role in the world. The dollar will once again reign. Ricardo Duran, head of economic research at Corredores Asociados, a large brokerage house, says that there are powerful reasons to expect the recovery of the greenback in relation to other currencies. What are they? “Bush is leaving and Obama will take power on January 20th and with him, confidence will return in the United States. If the yen and pound sterling are devalued, how can the Colombian peso not be?” The dollar’s strength will be backed additionally by investors who have sought security in U.S. Treasury bonds.
EMPLOYMENT: The big victim
The outlook is worrisome. In September, the unemployment rate grew for the third consecutive month. According to Mauricio Santa Maria, deputy director of Fedesarrollo, in 2009 Colombians should have to live with unemployment rates not less than 12 or 13 percent – and the negative effects this will have on household buying power. Beginning an economic slowdown cycle with a rising unemployment rate is bad news for the Colombian people.
INTEREST RATES: End of the climb
With a slowdown in progress, many soon expect lower interest rates. “It is very likely that the next move in terms of interest rates made by the Banco de la República will be to lower them. But we want to do that at the right time,” said José Darío Uribe, the Central Banks’s director. Some analysts believe that this expected cut in interest rates could come at the end of this year, like a Christmas present. A rate reduction could send signals of optimism to depressed businesspeople and consumers battered by the strong economic slowdown expected in 2009.
OIL: Prices have fallen too far
No one dares making forecasts on crude after the mess this year. But for the International Energy Agency (IEA) the situation of cheap oil could have reached its end. According to them, the price per barrel could rapidly return to $100 USD. Some predicted that in less than two years the price of crude could reach $200 USD. Now the IEA believes this level will be reached in 2030. Last week, the price in New York was below $60 USD, the lowest level it has been in the last 18 months. According to Andrew Walker, an economy expert at the BBC, the fall of oil prices is a result of the recession that plagues more developed economies. “This translates in less use of vehicles by inhabitants of those countries, and less raw materials and goods being shipped around the world.”
INFLATION: Same as last year.