Colombia’s external imbalances starting to unwind

Having ballooned during the post-pandemic recovery, Colombia’s current account deficit has started to narrow and should continue to do so in the coming quarters. This, alongside the shift in financing towards more stable FDI inflows, leaves the peso less vulnerable to swings in global risk appetite. It also supports our view that BanRep will start easing policy in October, but there’s a risk of a cut as soon as this month.