Friday, September 29, 2023

How does inflation affect the daily lives of Colombians?

People around the world, when buying clothes, household items or food, notice that their prices are increasing every year and even every month, and conclude that money is becoming less and less profitable.

This phenomenon is called inflation, which is defined as a sustained and general increase in the prices of goods and services purchased on a daily basis.

If prices and people’s incomes increase at the same time, this will not affect what is consumed on a daily basis. But if prices rise faster than incomes, there will not be enough money to buy the same things as before.

According to data from DANE and the Chocoramo Index, 5 years ago you could buy 600 Chocoramos with the then minimum wage. At that time, the product cost 1,300 Colombian pesos, while the minimum wage was 781,242 Colombian pesos.

While only 523 Chocorams could be purchased in 2023, considering that the product costs 2,200 Colombian pesos, the minimum wage is 1,160,000 Colombian pesos and the transportation support is $140,606.

Why are product prices rising in Colombia?

When the amount of things we want to buy, i.e. demand, equals the amount of products sellers are willing to supply, i.e. supply, prices rise slowly and steadily. However, when demand exceeds supply, the situation becomes more complicated.

This can happen when consumers (demanders) buy more or when sellers (suppliers) offer less than they want to buy.

When prices rise sharply in a very short period of time, people conclude that there is not enough income to buy the same things as before, that is, purchasing power is lost.

Banco de la República on inflation in Colombia

Leonardo Villar, manager of the Bank of the Republic, was present at the Andesco Congress in Cartagena last June and confirmed that Colombia could see a decline in inflation within about a year and a half. Clarification that the economic conditions required by the country must be met.

“Inflation is at unacceptably high levels and far from the 3 percent target set by the bank,” Villar said. “We are beginning the return to this goal, which we hope will occur gradually over the next year and a half, so that it can be completed towards the end of 2024,” he added.

“The alternative we have is not to reduce inflation or to increase it further. On the contrary: reducing inflation is essential so that we have long-term interest rates at low levels, stimulating investments and increasing long-term investments, even if it means sacrificing short-term growth,” concluded the manager of the Banco de la República.

Nation World News Desk
Nation World News Desk
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