Economy

Latin America on the recovery track: Peru and Colombia's growth in 2021 are the highest in a century

For 2022, forecasts are less encouraging, given the challenge of inflation and, consequently, the waning fiscal and monetary impulse of Latin American economies

The Colombia's central bank logo is seen in Bogota, Colombia October 1, 2018. Photo: REUTERS/Luisa Gonzalez/File Photo

LABS and Reuters

16.Feb.2022 17:47 BRT
UPDATED 18:36 BRT

In 2021, Peru’s GDP grew by 13.31% (the best result since data started to be compiled in 1922) and Colombia’s by 10.6%, also the highest increase in over a century (more precisely, the best figure since 1906);
The UN’s Economic Commission for Latin America and the Caribbean (ECLAC) predicts that the Peruvian economy will grow 3% this year and the Colombian economy, 3.5%.

Two statistics released this week show that Latin America‘s largest economies are on the path to recovery after the COVID-19 pandemic – the region was the most economically affected by the health crisis in 2020, recording record contractions.

In 2021, Peru’s Gross Domestic Product (GDP) grew by 13.31% (the best result since data started to be compiled in 1922) and Colombia‘s economy rose by 10.6%, also the highest increase in over a century (more precisely, the best figure since 1906), as already expected by economists.

For 2022, forecasts are less encouraging, given the challenge of inflation and, consequently, the waning fiscal and monetary impulse of Latin American economies compared to the beginning of the crisis, in 2020.

On Tuesday, the IMF said that Colombia‘s central bank will have to front-load interest rate hikes in the first half of this year in order to get a grip on inflation and maintain its hard-won credibility.

Indeed, inflation estimates for Colombia this year rose among analysts polled in a central bank survey. The 40 analysts surveyed by the bank expect inflation to end the year at a median of 5.44%, above the 4.48% recorded in January’s poll, and well away from the bank’s long-term target of 3%. As a result, analysts expect the bank’s seven-member board to raise borrowing costs by a median of 100 basis points to 5% at its meeting at the end of March.

The UN‘s Economic Commission for Latin America and the Caribbean (ECLAC) predicts that the Peruvian economy will grow 3% this year and the Colombian economy, 3.5%.

In interviews with Colombian outlets, the director of the National Administrative Department of Statistics (Dane), Juan Daniel Oviedo, attributed the strong recovery to the performance of four sectors: industry, commerce, transport, and tourism.

Almost the same sectors carried Peru’s recovery as well. As pointed out by Oxford Economics, a contraction in mining production was compensated by robust growth in manufacturing. In addition, the holiday season boosted restaurants & accommodations.

The GDP figures for Mexico and Brazil have not yet been released. But the growth expectations of the two largest economies are lower than those of Peru and Colombia: 5% and 4.5%, respectively.