COVID-19 second wave to impact Colombian economy throughout 2021

Colombia’s second wave of coronavirus infections, which led to tighter restrictions in major cities, will affect the country’s economy throughout the remainder of 2021, delaying its recovery, the head of the central bank’s technical team said on Wednesday, February 3.

The fallout from the post-holiday increase in contagion will be particularly visible in the 1st quarter, Hernando Vargas said in a virtual presentation.

Earlier this week the bank lowered its economic growth prediction for this year to between 2% and 6%, with 4.5% as the most likely figure, on concerns over recent restrictions. It had previously projected growth of between 3% and 7%.

The Andean country’s economy will have contracted between 6.8% and 7.4% last year, with a 7.2% contraction as the most likely figure, it added.

Large cities put in place shopping restrictions and curfews as cases soared after Christmas and intensive care unit occupancy exceeded 90%. Capital Bogota rolled back some measures on Tuesday, February 2.

“Various risks have materialized, we’ve seen an increase in COVID-19 infections and new isolation measures,” Vargas said. “That obviously delays the reopening of the economy and translates to lower growth in 2021, especially in the 1st quarter.”

The second wave will also have an impact on excess capacity, investment, and the survival of businesses, he said, and the economy will only return to pre-pandemic growth levels in 2022.

The bank also this week lowered inflation projections, predicting increases of 2.3% in 2021 and 2.7% in 2022.

“Excess capacity will be higher than predicted previously and those excesses will reduce more slowly,” Vargas said. “We foresee lower inflation that will be delayed in converging a bit more to the [3%] target, in 2022.”

Vaccination will help speed recovery in the medium term, Vargas added.

Colombia plans to begin COVID-19 vaccinations on February 20, but President Ivan Duque said on Wednesday potential export restrictions and vaccination hesitancy could be obstacles. – Rappler.com