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Inflation in Colombia in 2020 reached its lowest level in history for a calendar year, 1.61 percent, since when the National Administrative Department of Statistics (Dane) has records on this matter, that is, 1955.
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The recent record most similar to the data that the statistical entity revealed last night corresponds to that of 2013, when the Consumer Price Index (CPI) stood at 1.94 percent.
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This does not mean that in the last six and a half decades lower annual inflation has not been recorded. In fact, for the 12 months ended in July 1955, this indicator was -0.87 percent, according to the early records of the Dane. And while those are the lowest historical levels, the highest inflation reached in the country in a full year was the one observed in 1963, when it stood at 33.6 percent.
The CPI began its decline this year from the 3.86 percent observed in March, when the largest quarantine that the country has experienced in recent years began, which was generated by the arrival of covid-19 in the country.
In May, inflation was already at 2.85 percent, 15 basis points below the target of 3 percent established by the Banco de la República, and month after month it continued its gradual decline until it reached the minimum of 0.38 December percent.
The annual performance of the total CPI in December 2020 (1.61 percent) was mainly explained by the annual variation of the Food and non-alcoholic beverages and Accommodation, water, electricity, gas and other fuels divisions. The greatest variations were presented in the Health (4.96 percent) and Food and non-alcoholic beverages (4.8 percent) divisions, explained Juan Daniel Oviedo, director of Dane.
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‘We saw a rebound effect in the prices of clothing and footwear that had significant discounts within the framework of the day without VAT and normalized in December’
The inflation data for 2020 was in line with the expectations of market analysts whose projections pointed to a CPI of between 1.21 and 1.65 percent with an average of 1.42 percent.
According to the official, One of the activities that surprised not only due to its negative variation in the year but also due to its lower contribution to inflation last year was information and communication equipment, whose negative performance was related to the VAT lifting measures on the purchase of these equipment in the three days without VAT that were developed to reactivate the trade.
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“We saw a rebound effect in the prices of clothing and footwear that had significant discounts within the framework of the day without VAT and normalized in December. We also observe an upward behavior in the entertainment group, which includes tourist packages that had a rise in their prices during the holiday season”Said María Paula Castañeda, economist for Colombia at BBVA Research.
As revealed by Dane, the city with the most hikes was Cúcuta with 2.89 percent; then Popayán, with 2.68 percent. At the other extreme are Ibagué, Cartagena and Montería with 0.22; 0.35 and 0.77 percent, respectively. Bogotá, for its part, closed with an annual variation in the cost of living of 1.17 percent, that is, 44 basis points below the national average.
Adjustments for the year
As it is recalled, the inflation data is a fundamental element to know some increases in services and procedures that were previously tied to the minimum wage, as provided by the Government in article 49 of the National Development Plan (PND).
The aim is to bring the adjustments in some payments that citizens must make each year to values in line with the behavior of the economy, which is why they are detached from the variation of the minimum wage.
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In principle, the norm governs sanctions, fines and judicial fees, fees, stamps, budgets and state costs, which are made on the basis of the Tax Value Unit (UVT) disclosed by the Tax and Customs Directorate ( Dian) and whose calculation, in turn, is made on the basis of the CPI.
Another key adjustment with the inflation data is that of real estate rentals for housing, but it must be remembered that this increase is only made annually, that is, on the date the contracts expire.
ECONOMY AND BUSINESS
