According to the expert, these types of measures seek to take care of the pockets of Colombians so that they adapt better to the context and do not go overboard with credits or other obligations that exceed them.
“What the Bank of the Republic sought throughout this period of rate increases was to control excess household spending since, above all during 2022 but also in 2023, Colombians turned very strongly to the consumption of “goods and services financed in most cases with credit, which led the bank to make credit more expensive to moderate excess consumption and limit this behavior, perhaps unsustainable on the part of Colombian households that were taking on too much debt.”.
However, these types of decisions also impact the entire financial ecosystem, as is the case with the economic slowdown that has begun to be seen in one way or another.
In this regard, Pérez explained that we were indeed in a moment of slowdown that could cause the monetary entity to think about strategies so that this does not happen, or at least there is more balance.
“Now, we are in a completely different moment where the Bank of the Republic finds an economy where the dynamics have been slowing down and wants to avoid a slowdown. It is very hasty to talk about a consumption incentive for people and companies because the rates are still high, but it is the beginning of a cut that is going to take hold little by little.”
On the other hand, the outlook for the interest rate, which is the highest in the history of the country, will have interesting movements in the coming months, since Camilo Pérez shared that among the projections is that the Bank of the Republic’s rate could be reduced to 9%, even predicting that it could reach 6% in 2025.
Likewise, financial entities have been gradually consolidating strategies to support their clients and facilitate the payment of their obligations, processes that will take shape little by little in 2024 to the extent that interest rates, the cost of money in Colombia defined by the Bank of the Republic continue to yield, without forgetting and being very clear that the lowering of the rate impacts credit, but also deposits and investment: “It also impacts deposits, that is, the savings account that remunerates me, the bank or the CDT will also have a lower return”.
Is it a good time to apply for a loan?
With the current context, many would think that it is a good financial decision to take out some type of credit, however, the researcher and analyst calls for an exhaustive review of the following points before assuming the commitment:
“The first of them is very important, and it is: How sustainable is my payment source? A stable job, where every month I have a salary and can also fulfill my obligation.
The second thing to look at is the cost, financing in times like those we talked about last year, of high interest rates, because it was not the best time to take that credit. Probably within a few months towards 2025, it will be much more timely at a lower cost.
And third, also define the objective of that credit. On many occasions, credits are taken for the consumption of goods or services of a high sum. This can be, for example, a vehicle or a television, or even, for example, for services such as studying. You have to be very clear about the objective and if it aligns with the plan that I have as an individual, something tangible, realistic,” Pérez stated.
How can Colombians take care of their pockets at the beginning of the year?
Finally, the expert left some financial advice for this first phase of the year, sharing that the beginning of 2024 had reflected excess consumption by Colombians who had bought more than their income generation allowed, so it was likely that many will settle their accounts and tie their pockets:
“The most likely thing is that what is going to save our macroeconomic salary in 2024 is that households are going to have to withdraw a little. The suggestion is to be more cautious when consuming, let’s say, decisively, but also more conscious of the credit that you have already taken in the past.
Households are going to have limitations in these coming months and years and this is largely what is explaining the relationship of the economy. That is, we had two very, very good years of growth in 2021 and 2022, based on household consumption. 2023 was much slower and 2024 will surely also be the same again, taking into account the lower household dynamics and those limitations on taking new credit that are surely already weighing on Colombian families.“, concluded the director of Economic Research and Market Analysis of Banco Bogotá.