Colombia Stagflation

Worst-case scenario combining weak growth with persistent inflation.

Plausibility:

• Supply chain disruptions become permanent
• Productivity growth stalls
• Central bank loses credibility
• Fiscal dominance prevents adequate monetary response

Rationale:

• Moderate COP depreciation (6%) reflects ongoing weakness
• Inflation remains elevated (8%) despite weak demand
• Nominal wage growth (6.9%) fails to keep pace with inflation
• Real wages decline (-1%) as workers lose bargaining power
• Rising unemployment even among skilled workers
• Financial stress maximizes defaults