Monetary Policy Report - October 2020

1.1 Macroeconomic summary [Pág. 1]

• Recent data suggest that the technical staff’s appraisals of the condition and development of economic activity, inflation and the labor market have been in line with current trends, marked by a decline in demand and the persistence of ample excess productive capacity.
• The Colombian economy is likely to undergo a significant recession in 2020 (GDP contraction of 7.6%), though this may be less severe than projected in the previous report (-8.5%). Output is expected to have begun a slow recovery in the second half of this year, though it is not projected to return to pre-pandemic levels in 2021 amid significant global uncertainty.
• Labor market deterioration has been significant, and the unemployment rate remains at historically high levels despite some improvement in total employment, particularly among informal urban workers.
• Inflation projections have been revised upward but remain below 2% for the end of 2020 and 3% for the end of 2021. Average inflation expectations for December are below 2%, and at five years or less continue below or close to the targetrate.
• Both foreign demand and oil prices should continue to recover slowly in 2021, though without returning to pre-pandemic levels. Uncertainty over the pace and sustainability of this recovery is high.
• Global and domestic financial conditions have improved in the context of ample liquidity, though some indicators have not yet returned to pre-pandemic levels.

1.2 Monetary policy decision [Pág. 3]