2024-04-18 10:24:25
Colombian commerce faces a difficult economic situation, with 77% of merchants reporting stagnant or declining sales, according to the Fenalco Economic Log business survey.
Diario del Huila, Economy
The economic outlook for the first quarter of 2023 closed with discouraging figures for Colombian commerce, as revealed by the most recent business survey from the Fenalco Economic Log. The results show a difficult situation that lasted until March, with 77% of merchants reporting sales equal to or lower than those of the same period of the previous year, while only 23% registered an increase in their sales.
The difficult situation was not only evident in the commercial sector in general, but specific sectors such as clothing faced additional challenges. The increase in tariffs on products imported from Asia by 40% led to an upward readjustment in product prices, as Fenalco had previously warned.
Jaime Alberto Cabal, president of Fenalco, explained that this situation is largely due to the persistence of inflation, which has significantly impacted consumption, especially in durable goods such as vehicles, furniture and appliances. In addition, he highlighted that higher taxes on wage earners have reduced the propensity of Colombian households to make purchases.
Taking this situation into account, the union leader reiterated the need to declare an economic, social and environmental emergency in the departments of Cauca and Nariño, which report an alarming performance in their sales, as a consequence of the persistence of problems on the Pan-American Highway. .
Reducing interest rates was not enough
Despite the announced reduction in interest rates and the slowdown in inflation, Colombian retail trade continues to face difficulties in recovering. According to DANE, retail sales fell 1.8% in February, while employed personnel fell 0.4% compared to the same month of the previous year.
Jaime Alberto Cabal expressed his concern about the situation, highlighting that Colombian families are being cautious in their purchasing decisions, especially considering the decrease in the net income of middle and high-income earners, who have experienced an increase in the income tax. income via withholdings at source.
“Neither the announced reduction in interest rates nor the slowdown in inflation have been enough to reactivate trade. Colombian families are making their purchasing decisions very cautiously, especially if we take into account the decrease in the net income of middle and high-income earners who are suffering this year from an increase in income tax via withholdings at source. , which has had a negative impact on consumption“said Jaime Alberto Cabal, president of Fenalco.
The situation is especially critical for sectors such as vehicles, spare parts, motorcycles, repair shops and the fashion cluster, which includes clothing, leather and footwear. Furthermore, insecurity issues and portfolio deterioration are also contributing to the difficult trade situation.
“This situation is not only affecting job creation, but also tax collection, especially VAT. A drop was recorded in the real collection of national taxes in the first two months of 2024. It is surprising that the Government continues to be oblivious to these circumstances“added the union leader.
Business expectations, for their part, do not present a better outlook. For 72% of those surveyed, the situation will remain the same or worsen.
It is not surprising that there has been a decrease in the actual collection of national taxes during the first two months of 2024. The economic slowdown and the drop in sales are negatively impacting tax collections, especially with regard to VAT. As for immediate expectations, these remain moderate: 24% are optimistic, while 48% believe that things will remain the same and 28% anticipate a worsening of the situation.
Protests: a new pandemic for commerce
The growing phenomenon of protests in Colombia is affecting both citizens and commerce. Logistics costs and delays in the delivery of products to warehouses have increased due to this problem. Furthermore, the scheduling of business activities according to the march schedule, which is mostly carried out on work days, is affecting the productivity and competitiveness of companies.
Uncertainty grows
According to data provided by DANE, investment in the country experienced an alarming drop of 24.8% last year. This decline raises serious questions about future economic growth, since investment is a fundamental factor in boosting a country’s productive capacity, through the construction of infrastructure, industrial facilities, health, educational and commercial centers, among others.
The decrease in investment, which has gone from 23.2% of GDP in 2016 to 12.8% last year, is a reflection of the economic deterioration facing the country. This decline is mainly attributed to high interest rates and widespread political, economic and business uncertainty. The lack of clarity in government policies and legal uncertainty have generated an unfavorable climate for investment and economic development.
In addition, a series of factors have been identified that contribute to increased uncertainty, many of which have their origin in government decisions. Among these factors are the announcement to promote a constituent assembly, the intervention of the President in the resources committed in future periods, the lack of definition in the construction of the Bogotá Metro, the ambiguity in the decree of liquidation of the National Budget, the increase of insecurity in both urban and rural areas, and the discordant statements of government officials.
Likewise, the resignation of the director of the DNP and the controversies surrounding government management have contributed to increasing uncertainty. The disclosure of the Heritage Foundation’s Economic Freedom Index, which shows a progressive deterioration in Colombia, as well as the possibility of a new tax reform proposed by President Petro, have also generated concern in the economic and business sectors.
Another relevant factor is the government’s insistence on approving questionable reforms, as well as the President’s announcement about a possible renegotiation of the debt with the IMF, which could affect the perception of international markets about the country’s macroeconomic stability.
Given this panorama, economic and business agents are cautious and expectations about the economic future are moderate. The prevailing uncertainty poses significant challenges to the country’s economic recovery and sustainable development, requiring concrete actions by the government to restore confidence and promote an enabling environment for investment and economic growth.