The cost of living in the world is one of the most discussed topics these days, considering that it is a scourge that, although it shows signs of reduction in recent months, remains at a high level in some countries like Colombia, despite the efforts of central banks.
Precisely this is the subject of the recent report of the risk agency Moody’s, which assures that as a result of high inflation, another economic factor will continue to put pressure on the finances of states and households, which refers to interest rates, especially in the display markets.
Before the GDP data, industry and commerce remained in the red
In its report, titled “Panorama 2024: slow growth but improved financial conditions stabilize the outlook,” this rating agency warned that these two problems will lead to slow growth and some persistent inflationary pressure.
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“Another year of low growth is ahead, although slowing inflation will set the stage for rate cuts. EM (emerging markets) GDP growth will be slightly lower than in 2023, averaging about 3.5%–4%, or 3%–3.5% outside of China.
Housing has already created fewer jobs than before the pandemic
For Moody’s, inflation will continue to slow, but volatility in commodity prices may cause central banks to postpone interest rate cuts.
“Higher interest costs weaken the affordability of sovereign debt, which reduces fiscal buffers. Issuing new debt at higher rates makes debt more expensive for government borrowers, although debt levels will increase only moderately,” they added in their report.
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In the case of Colombia, which promotes the rating of Baa2, this agency maintains that the elimination of subsidies will maintain high prices for a longer time, stressing that “despite these factors, we expect reductions at the rate of these countries in 2024, with Colombia likely to be the first to cut and others to follow later in the year.”
In the context of wars taking place in different parts of the world, they emphasize that the economic and political chaos of the pandemic and the immediate period after the war between Russia and Ukraine have disappeared, but the long-term impact on the quality of credit remains. emerging market sovereignty continues.
“Recent volatility in global commodity prices and continued uncertainty surrounding the US Federal Reserve’s next steps have called into question when emerging market central banks will be able to ease their tightening monetary policy stance.” Moody’s said.
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Finally, and by way of conclusion, the report says that they expect inflation to continue to slow down in emerging markets and that interest rate cuts in most countries in 2024 will be sustainable in the short term. However, the speed and timing of the cuts will vary depending on the characteristics of each country.
