Unrest Roiling Colombia May Hit Economy, Central Banker Says

Social unrest and blockades of Colombian highways by demonstrators may slow the nation’s recovery from last year’s slump, according to a member of the central bank’s board.

“This very regrettable social conflict hurts the economic recovery,” said bank co-director, Carolina Soto, in reply to written questions. “There’s an increased risk perception, an increase in the nation’s risk premiums, an increased depreciation in the currency, giving less space for the current monetary stance.”

Soto and her colleagues on the central bank’s board are trying to provide a high level of stimulus to support the weak economy, which is still afflicted by mass unemployment following last year’s slump. The bank left its key interest rate at a record low 1.75% last month, but warned that a loss of investor confidence over the widening deficit would make it harder to maintain an expansionary policy.

The withdrawal of a controversial bill to increase taxes, and the resignation of the Finance Minister failed to placate demonstrators against the administration of president Ivan Duque. More protests are taking place Wednesday following another night of violence on Tuesday which saw police stations torched by rioters.

Highway blockades by protesters could also cause a temporary increase in inflation, causing shortages in some areas, Soto said. Chicken producers say that hundreds of thousands of birds have died because of food shortages caused by road blocks of striking truckers.

Annual inflation accelerated to 1.95% in April, faster than the estimates of all 15 analysts surveyed by Bloomberg. The increase was led by rising utilities bills and a surge in food prices. Despite the increase, it was still the twelfth month in which inflation has been below its 3% target.

©2021 Bloomberg L.P.

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