In order to inquire about the investment climate that is being experienced in the country and understand what factors may be affecting it, the National Association of Businessmen of Colombia (ANDI) conducted a survey of its affiliates in which it was concluded that the projects of this type have been reduced compared to August last year, when the last measurement was made.
Specifically, in August 2022, 47.1% of those surveyed had stated that the investments were being maintained, while according to the latest data collected this week, only 27.5% said the same.
For their part, in August the businessmen had responded that only 20.6% of their investments had been deferred; this week the number rose to 27.5%.
Likewise, in August, 3.2% of the participants indicated that the investments had been discarded; in February 2023 this figure increased to 5.4%.
It should be noted that in August 16.9% of businessmen had adjusted the amount of the investment; Currently, this percentage of adjustment increased significantly, to 34.9%, evidencing the moment of high uncertainty that the country is experiencing.
“One of the fundamental conditions to guarantee the future growth of the country’s economy is productive investment. That is why it is so important to be attentive to these signs and take actions aimed at counteracting the effects of a low growth scenario that we project between 0.5% and 1% for the year 2023. We have to make a great effort to attract investment foreign, generate local investment and achieve more economic activity. For all this, we need a climate of trust to be generated among all the actors”, said Bruce Mac Master, president of ANDI.
On the other hand, the decision of the entrepreneurs who have maintained their investments is attributed to projects that were started in previous years or that are necessary and relevant for the operation of the business (37.5%). The other reasons are: the good performance of sales that encourages them to continue with investment projects (16.3%), market opportunities (12.5%) and commitment to customers (9.6%) .
Additionally, 70.9% of the companies stated that they have presented an increase in the cost of debt that has affected their financial statements; 20.9% affirm that they have had to postpone, modify or discard the investment plans they had since their financing has become increasingly complicated due to the high interest rates; 12.8% said that they present difficulties in the company’s cash flow and 12.8% indicated that they have presented decreases in profits.
As for businessmen who have chosen to postpone their investment projects. The reasons indicated are: high interest rates (47.9%), political (31.3%) and economic uncertainty in the country (20.8%), legal uncertainty (15.6%), the general uncertainty of macroeconomic factors worldwide (14.6%), volatility in the exchange rate (12.5%), inflation (12.5%), among others.
Fedesarrollo also detected uncertainty
A very similar concept was delivered by the Financial Opinion Survey, presented by the Center for Economic and Social Research (Fedesarrollo). The entity considers that sociopolitical conditions would be what generates the most uncertainty in the markets and, therefore, slow down investment.
“Sociopolitical conditions were shown to be the most relevant aspect when it came to investing, being chosen by 44.4% of analysts (versus 19.4% the previous month). Monetary policy was in second place with 18.5% of participation (versus 22.6% the previous month)”, revealed the entity.
“Followed, in order, by economic growth and other factors with 11.1% of participation (versus 22.6% and 9.7% the previous month, respectively). For their part, external factors increased from 6.5% to 7.4% and fiscal policy significantly decreased its relevance, going from 19.4% in the previous month to 7.4% this month”, says the report.
“As in the previous measurement, security conditions are not a relevant factor for making investment decisions,” they reveal from Fedesarrollo.
Said uncertainty would also be affecting inflation, although reductions already began to be noticed in February, a condition that had not been seen for six months. This leads analysts to think that by the end of 2023 there would be a decrease in the reference, but it would not be as high. The indicator would reach 9%.
In January, annual inflation stood at 13.25%, lower than the analysts’ forecast (13.36%), the first downward surprise after six months. In February, analysts believe that inflation will be at 13.24% (in a range between 13.07% and 13.31%). “Analysts forecast that at the end of the year inflation will close at 9% (in a range between 8.70% and 9.91%), evidencing an increase in expectations compared to the previous month (8.89%), due to Therefore, inflation expectations remain outside the target range of the Banco de la República”, said the research center.