Academic literature on the topic 'Domestic food production'

This paper examines the impacts of Brazilian domestic ethanol production over several local agricultural food commodities, using a structural autoregressive model with error correction (VECM). Other variables are included in the model, as oil prices and exchange rate. Overall, results point out that Brazilian ethanol has low impact over domestic food commodities prices, even lesser than oil and exchange rate impacts. Simulated shocks on ethanol does not seems to have significant influence over commodities prices. Results suggest that the concern over biofuel and food debate has not much meaning in the Brazilian ethanol context.

There are lack of information andmisunderstanding, amongeconomic agents in agriculture farming system related to cassava potencies as food, feed, and industrial resources in agribusiness system. There are, among others, due to assymetric information system for economic potential of cassava marketing system (export and domestic market) in Indonesia, as well as, the information of production and potencies of cassava market in Indonesia, export and domestic market. Economic strategic to develop strive the cassava productivity is feasible to fulfill export and domestic requirement. Information in production allocation and marketing system for export and domesti consumption of cassava will be useful to design strategies for the product development in order to support food security.Key words: Cassava; Production; Potencies; Export and domestic marketing system.

The main purpose of the article is to describe the theoretical features of competitiveness and efficiency of production of agricultural sector of the Republic of Kazakhstan. When writing the work, economic and statistical methods, methods of comparison and analysis, synthesis and generalization were used.The article deals with the main indicators of the industry: domestic production and consumption; foreign trade and market size in the Republic of Kazakhstan. The main conclusions of the article are to determine the factors that state the competitive position of the fruit and vegetable industry in the Republic of Kazakhstan, as the agro-industrial complex needs to be improved, which would be based on scientifically based mechanisms and directed to the development of agricultural enterprises. In Kazakhstan, it is strategically beneficial to engage in the industrial processing of fruits and vegetables, which is due to the favorable climate, access to labor resources, growing demand from the population, and an increase in export potential. In general, the country meets the need for potatoes, fresh vegetables and melons. However, high prices, a narrow range of products, lack of proper presentation associated with the high cost of packaging and packaging, high transport costs, and a decrease in consumer demand for domestic fruits and vegetables in the domestic and foreign markets have led to their lack of competitiveness.

This paper examined the food security challenges vis-á-vis the paradox of increased domestic food production and food import in Nigeria. The study used time-series data from National Bureau of Statistic, Central Bank of Nigeria, Nigeria’s National Dailies and CIA Factbook reports. The trend analysis showed that the share of agriculture to the total Gross Domestic Product, GDP had a downward trend, especially from 1960-1979, where food import hovered around 2.92 % from 1960-74 and up to 9.85 % in 1975-79 of GDP. The result depicts an undulating trend in the contribution of agriculture and food import values to 2009 where food import rose astronomically from N2.6trillion (3.83 %) in 2005-2009 to about N20.6trillion (25.02 %) in 2010-2012. Results of the regression analysis confirmed that agriculture has a positive relationship with GDP, and contributes significantly with a coefficient of 0.852. The paradox however is that food import negates the a priori expectation as it is found to be positively related to the GDP: as food production increases marginally, food importation increases asymptotically. The paper recommends that reliance on food import could be minimized through increased budgetary allocation to the sector, and improvement in postharvest management practices that have hitherto, aggravated food insecurity in the country.

This paper examined the food security challenges vis-á-vis the paradox of increased domestic food production and food import in Nigeria. The study used time-series data from National Bureau of Statistic, Central Bank of Nigeria, Nigeria’s National Dailies and CIA Factbook reports. The trend analysis showed that the share of agriculture to the total Gross Domestic Product, GDP had a downward trend, especially from 1960-1979, where food import hovered around 2.92 % from 1960-74 and up to 9.85 % in 1975-79 of GDP. The result depicts an undulating trend in the contribution of agriculture and food import values to 2009 where food import rose astronomically from N2.6trillion (3.83 %) in 2005-2009 to about N20.6trillion (25.02 %) in 2010-2012. Results of the regression analysis confirmed that agriculture has a positive relationship with GDP, and contributes significantly with a coefficient of 0.852. The paradox however is that food import negates the a priori expectation as it is found to be positively related to the GDP: as food production increases marginally, food importation increases asymptotically. The paper recommends that reliance on food import could be minimized through increased budgetary allocation to the sector, and improvement in postharvest management practices that have hitherto, aggravated food insecurity in the country.

The food crisis that was triggered by climate change has swept the world lately. Climate change is affecting the pattern of the world that led to changes in the pattern of agricultural production as well. Changes in the pattern of production results in world food production schedule was delayed, and along with these changes, many countries export so that world food prices increase. Rising world food prices starting from US and then spread in the other parts of the world, including Indonesia. However, it is unknown how big relatedness of International food prices changes with food prices in Indonesia. This paper aims to analyze the connectedness between domestic rice market with international market, how long shock in international rice impact on the domestic market and to analyze interlinkage in domestic primary rice market. Using data rice price in indonesia and international rice price of FAO, writer found that market rice integrated both in domestic and foreign, so the fluctuations in both markets would affect each other Keywords: Food Crisis, Production Pattern, Domestic and International Market Integration

The food crisis that was triggered by climate change has swept the world lately. Climate change is affecting the pattern of the world that led to changes in the pattern of agricultural production as well. Changes in the pattern of production results in world food production schedule was delayed, and along with these changes, many countries export so that world food prices increase. Rising world food prices starting from US and then spread in the other parts of the world, including Indonesia. However, it is unknown how big relatedness of International food prices changes with food prices in Indonesia. This paper aims to analyze the connectedness between domestic rice market with international market, how long shock in international rice impact on the domestic market and to analyze interlinkage in domestic primary rice market. Using data rice price in indonesia and international rice price of FAO, writer found that market rice integrated both in domestic and foreign, so the fluctuations in both markets would affect each other Keywords: Food Crisis, Production Pattern, Domestic and International Market Integration

Food aid and domestic food production capacities in Zimbabwe have been compromised by the poor performance in the country’s agricultural sector, which has necessitated an increase in and a continual need for humanitarian assistance over the past decade. The country’s commercial cereal food import capacity has not been an exception as it has also been greatly affected by the poor performance of the agricultural sector and the shortage of foreign currency that hit the country in the past few years. Secondary data on food aid, commercial cereal imports and cereal food production was obtained from World Food Programme (WFP), Food and Agriculture Organisation (FAO), the Grain Marketing Board (GMB) of Zimbabwe and from Zimbabwe Statistics (ZimSTATS) databases. This time series data was then analysed in the Vector Autoregression (VAR) analysis. Trends observed in the time series data reveal that commercial cereal food imports and cereal food aid inflows to Zimbabwe had been increasing between 1988 and 2008. Domestic cereal food production levels however were observed to have been declining within the same period. The restricted VAR model which was specified to investigate the short and long term effects of food aid on food production and on commercial food imports in the country revealed a low statistically significant positive relationship between domestic food production and food aid volumes. Results from the model also indicated a negative relationship between commercial food imports and food aid volumes. This means that as food aid volumes to Zimbabwe increase, the volume of commercial cereal food imported into Zimbabwe falls. This result therefore suggests that food aid in the country had a displacement effect on commercial cereal food imports in the short term. The results of the Granger causality test and the estimation of the Impulse Response Functions also helped to confirm and reinforce these findings from the vector error correction model. The conclusions drawn from the study were that the responsiveness of domestic food supply, that is, cereal production, to food aid inflows in the short term has been elastic. That is to say, an increase in food aid inflows would influence an increase in the level of domestic food production in the short term. However, in the long term, findings confirm that food aid does indeed discourage domestic food production in the country. Also, for the relationship between food aid and commercial food imports, it can be concluded from the study findings that food aid in the short term has caused a reduction in commercial food imports whereas in the long term, food aid inflows have actually stimulated the commercial food import capacity. In recommendation, the Government of Zimbabwe, the private and public institutions as well as the Non-Governmental Organisations should partner and work together in defining the criteria for vulnerability assessment, food aid targeting and distribution, and in the implementation of strategies for ensuring national food availability. Such partnerships would help in ensuring the sustainability of food aid and food security in Zimbabwe, which is the main goal.

This thesis is a comparative economic study of domestic food production by the peasantry in two West Indian societies, Trinidad and Guadeloupe. It examines the period 1897 to 1946; Trinidad was then under British rule while Guadeloupe was a French colony. The study relates the evolution of domestic food production to fluctuations in export agriculture, revealing a strong inverse relationship between the two, in both colonies. The level of food imports also stimulated or stiffled domestic food production. Therefore, the domestic agricultural sector in Trinidad and Guadeloupe alike was never autonomous. The study draws on underdevelopment theory to highlight the analysis. The role of the colonial government is the major contrast between the two colonies. In Guadeloupe, except during W.W.II, the government was extremely supportive of the peasantry and their domestic food crops. In Trinidad, on the other hand, the government was largely indifferent, except during the Second World War. The difference in policy stemmed from republicanism in Guadeloupe and the Crown colony system in Trinidad. The study relies heavily on (basic) statistical information as well as other primary data. But information on domestic food production has, understandably, been difficult to come by. As a consequence the research has drawn on significant pieces of secondary works as well. As a comparative work, this thesis is distinctive as there are very few studies of West Indian history which compare British and French West Indian colonies. Moreover, there are equally few works in English on the French West Indies.

In order to study the effect of production systems aimed at sustainability on product quality and of sensory and non-sensory factors on product acceptance – the effect of farming system, year, milling and baking techniques on the sensory qualities of wheat bread as a model product was investigated using a descriptive test, and the effect of information and values on liking of bread using consumer tests.

Whole wheat and white breads were baked with wheat grown in six lots in established conventional and organic farming systems in field trails, in two subsequent years for the white bread.

Milling technique influenced flours’ rheology and had greater impact on the sensory qualities of whole wheat bread and on the slice area than did farming system and baking technique. Bread baked with roller-milled wheat was characterized by sweetness, juiciness, compactness and smaller slice area than bread baked with stone-milled wheat, which was characterized by saltiness, deformity and roasted cereals.

The effect of year on the white bread was greater than the effect of farming system or recipe modification. Bread baked with wheat harvested in 1999 had significantly lower intensities of crumb attributes such as smoothness, juiciness and elasticity, but higher rancid flavour, springiness, compressibility, mastication resistance than bread baked with wheat harvested in 2000. Bread baked with conventional flour had significantly higher juiciness and elasticity than organic bread.

Image analysis did not show differences in slice area between bread baked with conventionally and organically grown wheat harvested in 1999 compared with 2000. Information affected liking in relation to the type of provided information. Information on organic origin enhanced most liking of bread, particularly for the less liked samples and frequent consumers of organic food. Significantly different values and different specific liking of breads were found among consumer segments. Results linked values and age with “taste”.

This thesis is situated in the academic sphere of human geography. The overall aim is to identify the current challenges and possibilities Icelandic farmers face in terms of changes in importation laws. This research is exemplary in its field as it uses the narratives of the stakeholders, farmers in this case, as the main data source. The research questions were as following: Is there an agricultural cluster in the region and if so, how does it work; what challenges and possibilities do farmers in the municipality of Hrunamannahreppur face in terms of the recent import law and lastly; according to the farmers, how do policies and laws in Icelandic agriculture ensure long-term farming practices in Iceland. The thesis uses theories of agricultural localization theory, cluster theory and the concepts of competitive and comparative advantages along with the concept of food self-sufficiency. The methods used are semi-structured qualitative interviews during a field study in southern Iceland. Data sources include seven qualitative interviews with farmers in the selected area, a review of agricultural policies and frameworks, and other sources such as articles and media. The main findings are that there is an unexplained disconnect within agriculture and its actors, indicating that policies give preferentiality to economic gain rather than preserving long-term farming in Iceland.

Home food growing and preserving in Adelaide in the initial fifty years of the post-war period was a significant but hidden element of everyday life for many suburban households. This research acknowledges the overall decline that occurred in home production due to broader social changes but identifies a vibrant and dedicated continuation of such production at a previously untapped micro level. The continued demand for information ranging from broad, media driven sources to the intergenerational exchange of gardening and preserving knowledge enabled this passion to continue across subsequent generations, a finding substantiated in the backyards of many research participants.
Thesis (Ph.D.) -- University of Adelaide, School of Humanities, 2020

Use of domestic lupin flour will significantly increase the food safety of Russian Federation by means of replacement of imported protein produced in China; their rate takes 97.5% in our market. Plant protein, particularly the lupin protein answers the demands of actual time – the country needs cheap, qualitative products made from local row material. Nutritional value of lupin flour is determined by balanced content of protein (34-46%), oil (3-10%), fiber (10.6-18.2%) and carbohydrates (15-22%). Lupin flour is used for production of gluten-free foods with dietary and therapeutic properties; flour of lupin husk is full valuable, functionally technological and promising raw materials used as food protein supplement. Food supplement enriched with processed lupin should answer the limit acceptable concentration of alkaloid in foods. Foreign lupin flour production and use have the commercial scope; at the same time it practically stopes out in the RF in spite that the perspective of lupin row materials is declared for food quality improving. The article presents the possibility of lupin flour use in development of foods with functional purposes.

Every year the need for food supply of the population of the Russian Federation increases. The demand for various food products is growing. With the trend towards healthy and sports nutrition, the demand for dried plant foods is also on the rise. The article provides an analysis of the world and domestic market of dried products. Numerical indicators of imports of dried vegetables, fruits and berries to Russia are given. Charts for the implementation of imported dried fruits in Russia are shown.

Winter vetch, shaggy provides high-protein animal feed in the spring on complexes, food from this plant is perfectly absorbed by all domestic animals. The new variety of winter shaggy vetch "L3" surpasses the existing varieties in the productivity of green mass, dry matter, and seed productivity. In terms of protein content, this variety is not inferior to most varieties. The variety is recommended for two regions, but later zoning can be expanded. The variety is also characterized by high winter hardiness and drought resistance.

The results of an analytical review of the prospects for the development of organic production are presented. The organic food market is one of the most dynamically developing in the world. It has grown more than fivefold over the past decade. In connection with the entry into force of the Federal law "on organic products and on amendments to certain legislative acts of the Russian Federation" (2018), which is aimed at creating conditions for the sustainable development of organic agriculture in Russia in order to provide the domestic market with domestic environmentally friendly food products, through the implementation of the country's natural and economic potential, the intensification of agricultural production will allow Russia to become one of the world market leaders in "ecological agriculture"products.

The article deals with the topic of quality control of food products in the domestic market, the importance of displaying the standards of the Alimentarius Code in national legislation and their implementation at all stages of food production.

In this work we estimate the amount of energy required to produce the food consumed in the United States in 2002 and 2007. Data from government sources and the scientific literature were used to calculate the energy intensity of food production from agriculture, transportation, manufacturing, food sales, storage and preparation. Most data were from 2002; consequently we scaled all data from other years to 2002 by using ratios of total energy consumption in 2002 to total energy consumption in the year data were reported. We concluded that food production required at least 7,880±733 trillion BTU in 2002 and 8,080±752 trillion BTU of energy in 2007, over a third of which came from food handling in homes, restaurants and grocery stores. The energy used to produce food represents approximately 8% of energy consumption. Our estimate is for the energy required to produce the food consumed in the United States and takes into account food imports and exports. To account for net food exports in the agriculture sector we calculated values for the energy intensity of ten food categories and then used the mass of domestic food consumption in each category to calculate the energy embedded in the food consumed in the United States. The amount of energy required to produce the food consumed in the United States has policy implications because it is a substantial fraction of total energy consumption and is responsible for a commensurate amount of greenhouse gas emissions. There are many opportunities for decreasing the energy intensity of food production at all steps of the food system. Education of the public and policy measures that promote energy efficiency in the food sector have the potential for decreasing food waste and the energy intensity of the food system.

The main vectors of the transformation of world economic systems in the post-pandemic period are substantiated. The tendencies of slowdown in the growth of world food production, strengthening of measures to protect the domestic food market have been determined. Global and regional factors of aggravation of threats to food security and food availability are identified. An analysis of the development of the agro-food market of the EAEU is presented and an assessment of the level of food security in Kyrgyzstan is given. The possibilities of integration formation in the balanced development of the agro-food sector are revealed. The main directions and mechanisms for ensuring food security at the integration and national levels are substantiated. Measures are proposed for state support and stimulation of the growth of production and export of organic food. Specialized zones for large-scale production of competitive agricultural products have been identified.

The functional food market is rapidly developing both in Russia and abroad. The article provides an overview of the domestic modern market of functional structured dairy products of mass production and functional ingredients which is used in the dairy industry

The current Food Standards Agency consumer guidance states that consumers can freeze pre-packed food right up to the “use-by” date and, once food has been defrosted, it should be consumed within 24 hours. This strategic review has collated relevant data to determine whether there is an increased risk in relation to freezing ready-to-eat and non-ready-to-eat foods on the use-by date compared to the day before the use-by date. The review has focused on how the shelf-life of a food is determined and the effects of freezing, thawing and refrigeration on foodborne pathogens, including Bacillus spp., Campylobacter spp., Clostridium botulinum, Clostridium perfringens, Listeria monocytogenes, Salmonella, pathogenic Escherichia coli and Shigella spp. In the UK, food business operators are responsible for setting the safe shelf-life of a food which, in practice, should take into consideration the consumer habits, as well as the factors affecting shelf-life, such as food product characteristics, food processing techniques, transport, retail and domestic food storage temperatures, and type of packaging. Some countries, such as Ireland, New Zealand and Canada specifically recommend including safety margins within shelf lives. This is used to maintain brand integrity because it ensures that the food is consumed in its optimum condition. The FSA has collaborated with other organisations in the production of several guidance documents; however, there is no explicit requirement for the consideration of a margin of safety when setting shelf-life. There is also no legal requirement in the UK to consider a safety margin when setting shelf-life. According to regulations, pathogens should not be present in sufficient levels to cause foodborne illness on the use-by date, as food should still be safe to eat on that day. Given that these requirements are met, the risk assessed in this report arises from the processes of freezing, thawing and subsequent refrigerated storage for a further 24 hours, and the potential for these to increase pathogen levels. In this review, it was found that there is a risk of additional growth of certain pathogens during the refrigerated storage period although the impact of freezing and thawing on the extent of this growth was not readily evident. This risk would relate specifically to ready-to-eat foods as cooking of non-ready-to-eat foods after defrosting would eliminate pathogens. This report explores the potential issues related to consumer freezing on the use-by date and identifies additional information or research required to understand the risks involved. Overall, there is little evidence to suggest a significant change in risk between consumers freezing ready-to-eat food on the use-by date compared to freezing the food on the day before the use-by date. Specific areas that merit further research include the risks due to low temperature survival and growth of L. monocytogenes. There is also a lack of research on the effects of freezing, defrosting and refrigeration on the growth and toxin production of non-proteolytic C. botulinum, and the growth of Salmonella during domestic freezing and thawing. Finally, more information on how food business operators set shelf-life would enable a better understanding of the process and the extent of the safety margin when determining shelf-life of ready-to-eat and non-ready-to-eat foods.

Over the last few decades, the organic agriculture sector has experienced sustained growth. Globally, as well as in the European Union and Portugal, organic production accounts for just under 10% of total Utilised Agricultural Area (UAA) (FiBL, 2019; Eurostat, 2019; DGADR, 2019; INE, 2019; GPP, 2019). This growth has been seen in terms of production, number of producers, amount of retail sales, imports and exports. This article attempts to build on the multi-level perspective (MLP) of the socio-technical (ST) transitions theory by employing a whole systems analysis (Geels, 2018) of organic agriculture in Portugal, which defends an integrated vision of the systems, where multiple interactions occur within and among the niche, the regime and the landscape levels. This approach has been employed in order to develop a critical analysis of the current state of the Portuguese organic agriculture sector, stressing the multiplicity of elements that are contributing to the agro-food system´s transformation into a more sustainable one. In fact, the agro-food system is related with climate change but also has connections with other domains such as public health, water management, land use and biodiversity. Therefore, it is affected by shifts in these areas. This analysis considers developments in increasing domestic organic production, number of producers, amount of retail sales, imports, exports, market innovations, and the sector´s reconfiguration. The organic sector´s increase has been attributed to European regulation, institutionalization, standardization, farmer certification, external (government) subsidy support programs, incremental market improvements (visibility and product access), the emergence of new retailers, the rise of supporting consumers and a shift away from conventional agriculture (Truninger, 2010; DGADR, 2019; Pe´er et al, 2019). However, together with positive incentives, this sector also faces numerous barriers that are hindering a faster transformation. Difficulties for the sector to date have included: product placement; a disconnect between production, distribution and marketing systems; high transport costs; competition from imports; European subsidies focused on extensive crops (pastures, olive groves, and arable crops), entailing a substantial growth in the area of pasture to the detriment of other crops; the fact that the products that are in demand (fresh vegetables and fruit) are being neglected by Portuguese producers; expensive certification procedures; lack of adequate support and market expertise for national producers; the hybrid configuration of the sector; and price. Organic agriculture as a niche-innovation is still not greatly contributing to overall agricultural production. The low supply of organic products, despite its ever-increasing demand, suggests that a transition to increased organic production requires a deeper and faster food system reconfiguration, where an array of distinct policies are mobilized and a diversity of actions take place at different levels (Geels, 2018; Pe´er et al, 2019). This paper will attempt to contribute an overall critical assessment of the organic sector´s features and evolution and will identify some of the main obstacles to be overcome, in order to boost the sustainability transition of the agro-food system in Portugal.

In this paper, we assess the economy-wide impact of Climate Change (CC) on agriculture and food security in 20 Latin American and the Caribbean (LAC) countries. Specifically, we focus on the following three channels through which CC may affect agricultural and non-agricultural production: (i) agricultural yields; (ii) labor productivity in agriculture, and; (iii) economy-wide labor productivity. We implement the analysis using the Integrated Economic-Environmental Model (IEEM) and databases for 20 LAC available through the OPEN IEEM Platform. Our analysis identifies those countries most affected according to key indicators including Gross Domestic Product (GDP), international commerce, sectoral output, poverty, and emissions. Most countries experience negative impacts on GDP, with the exception of the major soybean producing countries, namely, Brazil, Argentina and Uruguay. We find that CC-induced crop productivity and labor productivity changes affect countries differently. The combined impact, however, indicates that Belize, Nicaragua, Guatemala and Paraguay would fare the worst. Early identification of these hardest hit countries can enable policy makers pre-empting these effects and beginning the design of adaptation strategies early on. In terms of greenhouse gas emissions, only Argentina, Chile and Uruguay would experience small increases in emissions.

1.1 Macroeconomic summary Economic recovery has consistently outperformed the technical staff’s expectations following a steep decline in activity in the second quarter of 2020. At the same time, total and core inflation rates have fallen and remain at low levels, suggesting that a significant element of the reactivation of Colombia’s economy has been related to recovery in potential GDP. This would support the technical staff’s diagnosis of weak aggregate demand and ample excess capacity. The most recently available data on 2020 growth suggests a contraction in economic activity of 6.8%, lower than estimates from January’s Monetary Policy Report (-7.2%). High-frequency indicators suggest that economic performance was significantly more dynamic than expected in January, despite mobility restrictions and quarantine measures. This has also come amid declines in total and core inflation, the latter of which was below January projections if controlling for certain relative price changes. This suggests that the unexpected strength of recent growth contains elements of demand, and that excess capacity, while significant, could be lower than previously estimated. Nevertheless, uncertainty over the measurement of excess capacity continues to be unusually high and marked both by variations in the way different economic sectors and spending components have been affected by the pandemic, and by uneven price behavior. The size of excess capacity, and in particular the evolution of the pandemic in forthcoming quarters, constitute substantial risks to the macroeconomic forecast presented in this report. Despite the unexpected strength of the recovery, the technical staff continues to project ample excess capacity that is expected to remain on the forecast horizon, alongside core inflation that will likely remain below the target. Domestic demand remains below 2019 levels amid unusually significant uncertainty over the size of excess capacity in the economy. High national unemployment (14.6% for February 2021) reflects a loose labor market, while observed total and core inflation continue to be below 2%. Inflationary pressures from the exchange rate are expected to continue to be low, with relatively little pass-through on inflation. This would be compatible with a negative output gap. Excess productive capacity and the expectation of core inflation below the 3% target on the forecast horizon provide a basis for an expansive monetary policy posture. The technical staff’s assessment of certain shocks and their expected effects on the economy, as well as the presence of several sources of uncertainty and related assumptions about their potential macroeconomic impacts, remain a feature of this report. The coronavirus pandemic, in particular, continues to affect the public health environment, and the reopening of Colombia’s economy remains incomplete. The technical staff’s assessment is that the COVID-19 shock has affected both aggregate demand and supply, but that the impact on demand has been deeper and more persistent. Given this persistence, the central forecast accounts for a gradual tightening of the output gap in the absence of new waves of contagion, and as vaccination campaigns progress. The central forecast continues to include an expected increase of total and core inflation rates in the second quarter of 2021, alongside the lapse of the temporary price relief measures put in place in 2020. Additional COVID-19 outbreaks (of uncertain duration and intensity) represent a significant risk factor that could affect these projections. Additionally, the forecast continues to include an upward trend in sovereign risk premiums, reflected by higher levels of public debt that in the wake of the pandemic are likely to persist on the forecast horizon, even in the context of a fiscal adjustment. At the same time, the projection accounts for the shortterm effects on private domestic demand from a fiscal adjustment along the lines of the one currently being proposed by the national government. This would be compatible with a gradual recovery of private domestic demand in 2022. The size and characteristics of the fiscal adjustment that is ultimately implemented, as well as the corresponding market response, represent another source of forecast uncertainty. Newly available information offers evidence of the potential for significant changes to the macroeconomic scenario, though without altering the general diagnosis described above. The most recent data on inflation, growth, fiscal policy, and international financial conditions suggests a more dynamic economy than previously expected. However, a third wave of the pandemic has delayed the re-opening of Colombia’s economy and brought with it a deceleration in economic activity. Detailed descriptions of these considerations and subsequent changes to the macroeconomic forecast are presented below. The expected annual decline in GDP (-0.3%) in the first quarter of 2021 appears to have been less pronounced than projected in January (-4.8%). Partial closures in January to address a second wave of COVID-19 appear to have had a less significant negative impact on the economy than previously estimated. This is reflected in figures related to mobility, energy demand, industry and retail sales, foreign trade, commercial transactions from selected banks, and the national statistics agency’s (DANE) economic tracking indicator (ISE). Output is now expected to have declined annually in the first quarter by 0.3%. Private consumption likely continued to recover, registering levels somewhat above those from the previous year, while public consumption likely increased significantly. While a recovery in investment in both housing and in other buildings and structures is expected, overall investment levels in this case likely continued to be low, and gross fixed capital formation is expected to continue to show significant annual declines. Imports likely recovered to again outpace exports, though both are expected to register significant annual declines. Economic activity that outpaced projections, an increase in oil prices and other export products, and an expected increase in public spending this year account for the upward revision to the 2021 growth forecast (from 4.6% with a range between 2% and 6% in January, to 6.0% with a range between 3% and 7% in April). As a result, the output gap is expected to be smaller and to tighten more rapidly than projected in the previous report, though it is still expected to remain in negative territory on the forecast horizon. Wide forecast intervals reflect the fact that the future evolution of the COVID-19 pandemic remains a significant source of uncertainty on these projections. The delay in the recovery of economic activity as a result of the resurgence of COVID-19 in the first quarter appears to have been less significant than projected in the January report. The central forecast scenario expects this improved performance to continue in 2021 alongside increased consumer and business confidence. Low real interest rates and an active credit supply would also support this dynamic, and the overall conditions would be expected to spur a recovery in consumption and investment. Increased growth in public spending and public works based on the national government’s spending plan (Plan Financiero del Gobierno) are other factors to consider. Additionally, an expected recovery in global demand and higher projected prices for oil and coffee would further contribute to improved external revenues and would favor investment, in particular in the oil sector. Given the above, the technical staff’s 2021 growth forecast has been revised upward from 4.6% in January (range from 2% to 6%) to 6.0% in April (range from 3% to 7%). These projections account for the potential for the third wave of COVID-19 to have a larger and more persistent effect on the economy than the previous wave, while also supposing that there will not be any additional significant waves of the pandemic and that mobility restrictions will be relaxed as a result. Economic growth in 2022 is expected to be 3%, with a range between 1% and 5%. This figure would be lower than projected in the January report (3.6% with a range between 2% and 6%), due to a higher base of comparison given the upward revision to expected GDP in 2021. This forecast also takes into account the likely effects on private demand of a fiscal adjustment of the size currently being proposed by the national government, and which would come into effect in 2022. Excess in productive capacity is now expected to be lower than estimated in January but continues to be significant and affected by high levels of uncertainty, as reflected in the wide forecast intervals. The possibility of new waves of the virus (of uncertain intensity and duration) represents a significant downward risk to projected GDP growth, and is signaled by the lower limits of the ranges provided in this report. Inflation (1.51%) and inflation excluding food and regulated items (0.94%) declined in March compared to December, continuing below the 3% target. The decline in inflation in this period was below projections, explained in large part by unanticipated increases in the costs of certain foods (3.92%) and regulated items (1.52%). An increase in international food and shipping prices, increased foreign demand for beef, and specific upward pressures on perishable food supplies appear to explain a lower-than-expected deceleration in the consumer price index (CPI) for foods. An unexpected increase in regulated items prices came amid unanticipated increases in international fuel prices, on some utilities rates, and for regulated education prices. The decline in annual inflation excluding food and regulated items between December and March was in line with projections from January, though this included downward pressure from a significant reduction in telecommunications rates due to the imminent entry of a new operator. When controlling for the effects of this relative price change, inflation excluding food and regulated items exceeds levels forecast in the previous report. Within this indicator of core inflation, the CPI for goods (1.05%) accelerated due to a reversion of the effects of the VAT-free day in November, which was largely accounted for in February, and possibly by the transmission of a recent depreciation of the peso on domestic prices for certain items (electric and household appliances). For their part, services prices decelerated and showed the lowest rate of annual growth (0.89%) among the large consumer baskets in the CPI. Within the services basket, the annual change in rental prices continued to decline, while those services that continue to experience the most significant restrictions on returning to normal operations (tourism, cinemas, nightlife, etc.) continued to register significant price declines. As previously mentioned, telephone rates also fell significantly due to increased competition in the market. Total inflation is expected to continue to be affected by ample excesses in productive capacity for the remainder of 2021 and 2022, though less so than projected in January. As a result, convergence to the inflation target is now expected to be somewhat faster than estimated in the previous report, assuming the absence of significant additional outbreaks of COVID-19. The technical staff’s year-end inflation projections for 2021 and 2022 have increased, suggesting figures around 3% due largely to variation in food and regulated items prices. The projection for inflation excluding food and regulated items also increased, but remains below 3%. Price relief measures on indirect taxes implemented in 2020 are expected to lapse in the second quarter of 2021, generating a one-off effect on prices and temporarily affecting inflation excluding food and regulated items. However, indexation to low levels of past inflation, weak demand, and ample excess productive capacity are expected to keep core inflation below the target, near 2.3% at the end of 2021 (previously 2.1%). The reversion in 2021 of the effects of some price relief measures on utility rates from 2020 should lead to an increase in the CPI for regulated items in the second half of this year. Annual price changes are now expected to be higher than estimated in the January report due to an increased expected path for fuel prices and unanticipated increases in regulated education prices. The projection for the CPI for foods has increased compared to the previous report, taking into account certain factors that were not anticipated in January (a less favorable agricultural cycle, increased pressure from international prices, and transport costs). Given the above, year-end annual inflation for 2021 and 2022 is now expected to be 3% and 2.8%, respectively, which would be above projections from January (2.3% and 2,7%). For its part, expected inflation based on analyst surveys suggests year-end inflation in 2021 and 2022 of 2.8% and 3.1%, respectively. There remains significant uncertainty surrounding the inflation forecasts included in this report due to several factors: 1) the evolution of the pandemic; 2) the difficulty in evaluating the size and persistence of excess productive capacity; 3) the timing and manner in which price relief measures will lapse; and 4) the future behavior of food prices. Projected 2021 growth in foreign demand (4.4% to 5.2%) and the supposed average oil price (USD 53 to USD 61 per Brent benchmark barrel) were both revised upward. An increase in long-term international interest rates has been reflected in a depreciation of the peso and could result in relatively tighter external financial conditions for emerging market economies, including Colombia. Average growth among Colombia’s trade partners was greater than expected in the fourth quarter of 2020. This, together with a sizable fiscal stimulus approved in the United States and the onset of a massive global vaccination campaign, largely explains the projected increase in foreign demand growth in 2021. The resilience of the goods market in the face of global crisis and an expected normalization in international trade are additional factors. These considerations and the expected continuation of a gradual reduction of mobility restrictions abroad suggest that Colombia’s trade partners could grow on average by 5.2% in 2021 and around 3.4% in 2022. The improved prospects for global economic growth have led to an increase in current and expected oil prices. Production interruptions due to a heavy winter, reduced inventories, and increased supply restrictions instituted by producing countries have also contributed to the increase. Meanwhile, market forecasts and recent Federal Reserve pronouncements suggest that the benchmark interest rate in the U.S. will remain stable for the next two years. Nevertheless, a significant increase in public spending in the country has fostered expectations for greater growth and inflation, as well as increased uncertainty over the moment in which a normalization of monetary policy might begin. This has been reflected in an increase in long-term interest rates. In this context, emerging market economies in the region, including Colombia, have registered increases in sovereign risk premiums and long-term domestic interest rates, and a depreciation of local currencies against the dollar. Recent outbreaks of COVID-19 in several of these economies; limits on vaccine supply and the slow pace of immunization campaigns in some countries; a significant increase in public debt; and tensions between the United States and China, among other factors, all add to a high level of uncertainty surrounding interest rate spreads, external financing conditions, and the future performance of risk premiums. The impact that this environment could have on the exchange rate and on domestic financing conditions represent risks to the macroeconomic and monetary policy forecasts. Domestic financial conditions continue to favor recovery in economic activity. The transmission of reductions to the policy interest rate on credit rates has been significant. The banking portfolio continues to recover amid circumstances that have affected both the supply and demand for loans, and in which some credit risks have materialized. Preferential and ordinary commercial interest rates have fallen to a similar degree as the benchmark interest rate. As is generally the case, this transmission has come at a slower pace for consumer credit rates, and has been further delayed in the case of mortgage rates. Commercial credit levels stabilized above pre-pandemic levels in March, following an increase resulting from significant liquidity requirements for businesses in the second quarter of 2020. The consumer credit portfolio continued to recover and has now surpassed February 2020 levels, though overall growth in the portfolio remains low. At the same time, portfolio projections and default indicators have increased, and credit establishment earnings have come down. Despite this, credit disbursements continue to recover and solvency indicators remain well above regulatory minimums. 1.2 Monetary policy decision In its meetings in March and April the BDBR left the benchmark interest rate unchanged at 1.75%.

This report forecasts growth in developing Asia of 7.1% in 2021 and 5.4% in 2022 in an uneven recovery caused by divergent growth paths. Its theme chapter explores sustainable agriculture. Growth forecasts are revised up for East Asia and Central Asia from the projections made in April, but down for South Asia, Southeast Asia, and the Pacific. This reflects differences in vaccination progress and control of domestic COVID-19 outbreaks but also other factors, including rising commodity prices and depressed tourism. Inflation is expected to remain under control. The main risks to the economic outlook come from the COVID-19 pandemic, including the emergence of new variants, slower-than-expected vaccine rollouts, and waning vaccine effectiveness. Sustainable food production and agricultural systems that are resilient to climate change will be crucial for developing Asia. To transform agriculture in the region, its economies must tackle challenges from changing consumer demand, changing demographics, and a changing and more fragile environment.

Macroeconomic summary Annual inflation continued to rise in the first quarter (8.5%) and again outpaced both market expectations and the technical staff’s projections. Inflation in major consumer price index (CPI) baskets has accelerated year-to-date, rising in March at an annual rate above 3%. Food prices (25.4%) continued to contribute most to rising inflation, mainly affected by a deterioration in external supply and rising costs of agricultural inputs. Increases in transportation prices and in some utility rates (energy and gas) can explain the acceleration in regulated items prices (8.3%). For its part, the increase in inflation excluding food and regulated items (4.5%) would be the result of shocks in supply and external costs that have been more persistent than expected, the effects of indexation, accumulated inflationary pressures from the exchange rate, and a faster-than-anticipated tightening of excess productive capacity. Within the basket excluding food and regulated items, external inflationary pressures have meaningfully impacted on goods prices (6.4%), which have been accelerating since the last quarter of 2021. Annual growth in services prices (3.8%) above the target rate is due primarily to food away from home (14.1%), which was affected by significant increases in food and utilities prices and by a rise in the legal monthly minimum wage. Housing rentals and other services prices also increased, though at rates below 3%. Forecast and expected inflation have increased and remain above the target rate, partly due to external pressures (prices and costs) that have been more persistent than projected in the January report (Graphs 1.1 and 1.2). Russia’s invasion of Ukraine accentuated inflationary pressures, particularly on international prices for certain agricultural goods and inputs, energy, and oil. The current inflation projection assumes international food prices will increase through the middle of this year, then remain high and relatively stable for the remainder of 2022. Recovery in the perishable food supply is forecast to be less dynamic than previously anticipated due to high agricultural input prices. Oil prices should begin to recede starting in the second half of the year, but from higher levels than those presented in the previous report. Given the above, higher forecast inflation could accentuate indexation effects and increase inflation expectations. The reversion of a rebate on value-added tax (VAT) applied to cleaning and hygiene products, alongside the end of Colombia’s COVID-19 health emergency, could increase the prices of those goods. The elimination of excess productive capacity on the forecast horizon, with an output gap close to zero and somewhat higher than projected in January, is another factor to consider. As a consequence, annual inflation is expected to remain at high levels through June. Inflation should then decline, though at a slower pace than projected in the previous report. The adjustment process of the monetary policy rate wouldcontribute to pushing inflation and its expectations toward the target on the forecast horizon. Year-end inflation for 2022 is expected to be around 7.1%, declining to 4.8% in 2023. Economic activity again outperformed expectations. The technical staff’s growth forecast for 2022 has been revised upward from 4.3% to 5% (Graph 1.3). Output increased more than expected in annual terms in the fourth quarter of 2021 (10.7%), driven by domestic demand that came primarily because of private consumption above pre-pandemic levels. Investment also registered a significant recovery without returning to 2019 levels and with mixed performance by component. The trade deficit increased, with significant growth in imports similar to that for exports. The economic tracking indicator (ISE) for January and February suggested that firstquarter output would be higher than previously expected and that the positive demand shock observed at the end of 2021 could be fading slower than anticipated. Imports in consumer goods, retail sales figures, real restaurant and hotel income, and credit card purchases suggest that household spending continues to be dynamic, with levels similar to those registered at the end of 2021. Project launch and housing starts figures and capital goods import data suggest that investment also continues to recover but would remain below pre-pandemic levels. Consumption growth is expected to decelerate over the year from high levels reached over the last two quarters. This would come amid tighter domestic and external financial conditions, the exhaustion of suppressed demand, and a deterioration of available household income due to increased inflation. Investment is expected to continue to recover, while the trade deficit should tighten alongside high oil and other export commodity prices. Given all of the above, first-quarter economic growth is now expected to be 7.2% (previously 5.2%) and 5.0% for 2022 as a whole (previously 4.3%). Output growth would continue to moderate in 2023 (2.9%, previously 3.1%), converging similar to long-term rates. The technical staff’s revised projections suggest that the output gap would remain at levels close to zero on the forecast horizon but be tighter than forecast in January (Graph 1.4). These estimates continue to be affected by significant uncertainty associated with geopolitical tensions, external financial conditions, Colombia’s electoral cycle, and the COVID-19 pandemic. External demand is now projected to grow at a slower pace than previously expected amid increased global inflationary pressures, high oil prices, and tighter international financial conditions than forecast in January. The Russian invasion of Ukraine and its inflationary effects on prices for oil and certain agricultural goods and inputs accentuated existing global inflationary pressures originating in supply restrictions and increased international costs. A decline in the supply of Russian oil, low inventory levels, and continued production limits on behalf of the Organization of Petroleum Exporting Countries and its allies (OPEC+) can explain increased projected oil prices for 2022 (USD 100.8/barrel, previously USD 75.3) and 2023 (USD 86.8/barrel, previously USD 71.2). The forecast trajectory for the U.S. Federal Reserve (Fed) interest rate has increased for this and next year to reflect higher real and expected inflation and positive performance in the labormarket and economic activity. The normalization of monetary policy in various developed and emerging market economies, more persistent supply and cost shocks, and outbreaks of COVID-19 in some Asian countries contributed to a reduction in the average growth outlook for Colombia’s trade partners for 2022 (2.8%, previously 3.3%) and 2023 (2.4%, previously 2.6%). In this context, the projected path for Colombia’s risk premium increased, partly due to increased geopolitical global tensions, less expansionary monetary policy in the United States, an increase in perceived risk for emerging markets, and domestic factors such as accumulated macroeconomic imbalances and political uncertainty. Given all the above, external financial conditions are tighter than projected in January report. External forecasts and their impact on Colombia’s macroeconomic scenario continue to be affected by considerable uncertainty, given the unpredictability of both the conflict between Russia and Ukraine and the pandemic. The current macroeconomic scenario, characterized by high real inflation levels, forecast and expected inflation above 3%, and an output gap close to zero, suggests an increased risk of inflation expectations becoming unanchored. This scenario offers very limited space for expansionary monetary policy. Domestic demand has been more dynamic than projected in the January report and excess productive capacity would have tightened more quickly than anticipated. Headline and core inflation rose above expectations, reflecting more persistent and important external shocks on supply and costs. The Russian invasion of Ukraine accentuated supply restrictions and pressures on international costs. This partly explains the increase in the inflation forecast trajectory to levels above the target in the next two years. Inflation expectations increased again and are above 3%. All of this increased the risk of inflation expectations becoming unanchored and could generate indexation effects that move inflation still further from the target rate. This macroeconomic context also implies reduced space for expansionary monetary policy. 1.2 Monetary policy decision Banco de la República’s board of directors (BDBR) continues to adjust its monetary policy. In its meetings both in March and April of 2022, it decided by majority to increase the monetary policy rate by 100 basis points, bringing it to 6.0% (Graph 1.5).

Macroeconomic summary Several factors contributed to an increase in projected inflation on the forecast horizon, keeping it above the target rate. These included inflation in December that surpassed expectations (5.62%), indexation to higher inflation rates for various baskets in the consumer price index (CPI), a significant real increase in the legal minimum wage, persistent external and domestic inflationary supply shocks, and heightened exchange rate pressures. The CPI for foods was affected by the persistence of external and domestic supply shocks and was the most significant contributor to unexpectedly high inflation in the fourth quarter. Price adjustments for fuels and certain utilities can explain the acceleration in inflation for regulated items, which was more significant than anticipated. Prices in the CPI for goods excluding food and regulated items also rose more than expected. This was partly due to a smaller effect on prices from the national government’s VAT-free day than anticipated by the technical staff and more persistent external pressures, including via peso depreciation. By contrast, the CPI for services excluding food and regulated items accelerated less than expected, partly reflecting strong competition in the communications sector. This was the only major CPI basket for which prices increased below the target inflation rate. The technical staff revised its inflation forecast upward in response to certain external shocks (prices, costs, and depreciation) and domestic shocks (e.g., on meat products) that were stronger and more persistent than anticipated in the previous report. Observed inflation and a real increase in the legal minimum wage also exceeded expectations, which would boost inflation by affecting price indexation, labor costs, and inflation expectations. The technical staff now expects year-end headline inflation of 4.3% in 2022 and 3.4% in 2023; core inflation is projected to be 4.5% and 3.6%, respectively. These forecasts consider the lapse of certain price relief measures associated with the COVID-19 health emergency, which would contribute to temporarily keeping inflation above the target on the forecast horizon. It is important to note that these estimates continue to contain a significant degree of uncertainty, mainly related to the development of external and domestic supply shocks and their ultimate effects on prices. Other contributing factors include high price volatility and measurement uncertainty related to the extension of Colombia’s health emergency and tax relief measures (such as the VAT-free days) associated with the Social Investment Law (Ley de Inversión Social). The as-yet uncertain magnitude of the effects of a recent real increase in the legal minimum wage (that was high by historical standards) and high observed and expected inflation, are additional factors weighing on the overall uncertainty of the estimates in this report. The size of excess productive capacity remaining in the economy and the degree to which it is closing are also uncertain, as the evolution of the pandemic continues to represent a significant forecast risk. margin, could be less dynamic than expected. And the normalization of monetary policy in the United States could come more quickly than projected in this report, which could negatively affect international financing costs. Finally, there remains a significant degree of uncertainty related to the duration of supply chocks and the degree to which macroeconomic and political conditions could negatively affect the recovery in investment. The technical staff revised its GDP growth projection for 2022 from 4.7% to 4.3% (Graph 1.3). This revision accounts for the likelihood that a larger portion of the recent positive dynamic in private consumption would be transitory than previously expected. This estimate also contemplates less dynamic investment behavior than forecast in the previous report amid less favorable financial conditions and a highly uncertain investment environment. Third-quarter GDP growth (12.9%), which was similar to projections from the October report, and the fourth-quarter growth forecast (8.7%) reflect a positive consumption trend, which has been revised upward. This dynamic has been driven by both public and private spending. Investment growth, meanwhile, has been weaker than forecast. Available fourth-quarter data suggest that consumption spending for the period would have exceeded estimates from October, thanks to three consecutive months that included VAT-free days, a relatively low COVID-19 caseload, and mobility indicators similar to their pre-pandemic levels. By contrast, the most recently available figures on new housing developments and machinery and equipment imports suggest that investment, while continuing to rise, is growing at a slower rate than anticipated in the previous report. The trade deficit is expected to have widened, as imports would have grown at a high level and outpaced exports. Given the above, the technical staff now expects fourth-quarter economic growth of 8.7%, with overall growth for 2021 of 9.9%. Several factors should continue to contribute to output recovery in 2022, though some of these may be less significant than previously forecast. International financial conditions are expected to be less favorable, though external demand should continue to recover and terms of trade continue to increase amid higher projected oil prices. Lower unemployment rates and subsequent positive effects on household income, despite increased inflation, would also boost output recovery, as would progress in the national vaccination campaign. The technical staff expects that the conditions that have favored recent high levels of consumption would be, in large part, transitory. Consumption spending is expected to grow at a slower rate in 2022. Gross fixed capital formation (GFCF) would continue to recover, approaching its pre-pandemic level, though at a slower rate than anticipated in the previous report. This would be due to lower observed GFCF levels and the potential impact of political and fiscal uncertainty. Meanwhile, the policy interest rate would be less expansionary as the process of monetary policy normalization continues. Given the above, growth in 2022 is forecast to decelerate to 4.3% (previously 4.7%). In 2023, that figure (3.1%) is projected to converge to levels closer to the potential growth rate. In this case, excess productive capacity would be expected to tighten at a similar rate as projected in the previous report. The trade deficit would tighten more than previously projected on the forecast horizon, due to expectations of an improved export dynamic and moderation in imports. The growth forecast for 2022 considers a low basis of comparison from the first half of 2021. However, there remain significant downside risks to this forecast. The current projection does not, for example, account for any additional effects on economic activity resulting from further waves of COVID-19. High private consumption levels, which have already surpassed pre-pandemic levels by a large margin, could be less dynamic than expected. And the normalization of monetary policy in the United States could come more quickly than projected in this report, which could negatively affect international financing costs. Finally, there remains a significant degree of uncertainty related to the duration of supply chocks and the degree to which macroeconomic and political conditions could negatively affect the recovery in investment. External demand for Colombian goods and services should continue to recover amid significant global inflation pressures, high oil prices, and less favorable international financial conditions than those estimated in October. Economic activity among Colombia’s major trade partners recovered in 2021 amid countries reopening and ample international liquidity. However, that growth has been somewhat restricted by global supply chain disruptions and new outbreaks of COVID-19. The technical staff has revised its growth forecast for Colombia’s main trade partners from 6.3% to 6.9% for 2021, and from 3.4% to 3.3% for 2022; trade partner economies are expected to grow 2.6% in 2023. Colombia’s annual terms of trade increased in 2021, largely on higher oil, coffee, and coal prices. This improvement came despite increased prices for goods and services imports. The expected oil price trajectory has been revised upward, partly to supply restrictions and lagging investment in the sector that would offset reduced growth forecasts in some major economies. Elevated freight and raw materials costs and supply chain disruptions continue to affect global goods production, and have led to increases in global prices. Coupled with the recovery in global demand, this has put upward pressure on external inflation. Several emerging market economies have continued to normalize monetary policy in this context. Meanwhile, in the United States, the Federal Reserve has anticipated an end to its asset buying program. U.S. inflation in December (7.0%) was again surprisingly high and market average inflation forecasts for 2022 have increased. The Fed is expected to increase its policy rate during the first quarter of 2022, with quarterly increases anticipated over the rest of the year. For its part, Colombia’s sovereign risk premium has increased and is forecast to remain on a higher path, to levels above the 15-year-average, on the forecast horizon. This would be partly due to the effects of a less expansionary monetary policy in the United States and the accumulation of macroeconomic imbalances in Colombia. Given the above, international financial conditions are projected to be less favorable than anticipated in the October report. The increase in Colombia’s external financing costs could be more significant if upward pressures on inflation in the United States persist and monetary policy is normalized more quickly than contemplated in this report. As detailed in Section 2.3, uncertainty surrounding international financial conditions continues to be unusually high. Along with other considerations, recent concerns over the potential effects of new COVID-19 variants, the persistence of global supply chain disruptions, energy crises in certain countries, growing geopolitical tensions, and a more significant deceleration in China are all factors underlying this uncertainty. The changing macroeconomic environment toward greater inflation and unanchoring risks on inflation expectations imply a reduction in the space available for monetary policy stimulus. Recovery in domestic demand and a reduction in excess productive capacity have come in line with the technical staff’s expectations from the October report. Some upside risks to inflation have materialized, while medium-term inflation expectations have increased and are above the 3% target. Monetary policy remains expansionary. Significant global inflationary pressures and the unexpected increase in the CPI in December point to more persistent effects from recent supply shocks. Core inflation is trending upward, but remains below the 3% target. Headline and core inflation projections have increased on the forecast horizon and are above the target rate through the end of 2023. Meanwhile, the expected dynamism of domestic demand would be in line with low levels of excess productive capacity. An accumulation of macroeconomic imbalances in Colombia and the increased likelihood of a faster normalization of monetary policy in the United States would put upward pressure on sovereign risk perceptions in a more persistent manner, with implications for the exchange rate and the natural rate of interest. Persistent disruptions to international supply chains, a high real increase in the legal minimum wage, and the indexation of various baskets in the CPI to higher inflation rates could affect price expectations and push inflation above the target more persistently. These factors suggest that the space to maintain monetary stimulus has continued to diminish, though monetary policy remains expansionary. 1.2 Monetary policy decision Banco de la República’s board of directors (BDBR) in its meetings in December 2021 and January 2022 voted to continue normalizing monetary policy. The BDBR voted by a majority in these two meetings to increase the benchmark interest rate by 50 and 100 basis points, respectively, bringing the policy rate to 4.0%.

1.1 Macroeconomic summary In September, headline inflation (11.4% annually) and the average of core inflation indicators (8.6% annually) continued on a rising trend, and higher increases than expected were recorded. Forecasts increased again, and inflation expectations remained above 3%. Inflationary surprises in the third quarter were significant and widespread, and they are the result of several shocks. On the one hand, international cost and price shocks, which have mainly affected goods and foods, continue to exert upwards pressure on national inflation. In addition to these external supply shocks, domestic supply shocks have also affected foods. On the other hand, the strong recovery of aggregate demand, especially for private consumption and for machinery and equipment, as well as a higher accumulated depreciation of the Colombian peso and its pass-through to domestic prices also explain the rise in inflation. Indexation also contributes, both through the Consumer Price Index (CPI) and through the Producer Price Index (PPI), which continues to have a significant impact on electricity prices and, to a lesser degree, on other public utilities and rent. In comparison with July’s report, the new forecast trajectory for headline and core inflation (excluding food and regulated items) is higher in the forecast horizon, mainly due to exchange rate pressures, higher excess demand, and indexation at higher inflation rates, but it maintains a trend of convergence towards the target. In the case of food, a good domestic supply of perishable foods and some moderation in international processed food prices are still expected. However, the technical staff estimates higher pressures on this group’s prices from labor costs, raw material prices, and exchange rates. In terms of the CPI for regulated items, the new forecast supposes reductions in electricity prices at the end of the year, but the effects of indexation at higher inflation rates and the expected rises in fuel prices would continue to push this CPI group. Therefore, the new projection suggests that, in December, inflation would reach 11.3% and would decrease throughout 2023 and 2024, closing the year at 7.1% and 3.5%, respectively. These forecasts have a high level of uncertainty, due especially to the future behavior of international financial conditions, external price and cost shocks, the persistence of depreciation of the Colombian peso, the pace of adjustment of domestic demand, the indexation degree of nominal contracts, and the decisions that would be made regarding domestic fuel and electricity prices. Economic activity continues to surprise on the upside, and the projection of growth for 2022 rose from 6.9% to 7.9% but lowered for 2023 from 1.1% to 0.5%. Thus, excess demand is higher than estimated in the previous report, and it would diminish in 2023. Economic growth in the second quarterwas higher than estimated in July due to stronger domestic demand, mainly because of private consumption. Economic activity indicators for the third quarter suggest that the GDP would stay at a high level, above its potential, with an annual change of 6.4%, and 0.6% higher than observed in the second quarter. Nevertheless, these numbers reflect deceleration in its quarterly and annual growth. Domestic demand would show similar behavior, with a high value, higher than that of output. This can be explained partly by the strong behavior of private consumption and investment in machinery and equipment. In the third quarter, investment in construction would have continued with mediocre performance, which would still place it at levels lower than those observed before the pandemic. The trade deficit would have widened due to high imports with a stronger trend than that for exports. It is expected that, in the forecast horizon, consumption would decrease from its current high levels, partly as a consequence of tighter domestic financial conditions, lower repressed demand, higher exchange rate pressures on imported goods prices, and the deterioration of actual income due to the rise in inflation. Investment would continue to lag behind, without reaching the levels observed before the pandemic, in a context of high financing costs and high uncertainty. A lower projected behavior in domestic demand and the high levels of prices for oil and other basic goods that the country exports would be reflected in a reduction in the trade deficit. Due to all of this, economic growth for all of 2022, 2023, and 2024 would be 7.9%, 0.5%, and 1.3%, respectively. Expected excess demand (measured via the output gap) is estimated to be higher than contemplated in the previous report; it would diminish in 2023 and could turn negative in 2024. These estimates remain subject to a high degree of uncertainty related to global political tension, a rise in international interest rates, and the effects of this rise on demand and financial conditions abroad. In the domestic context, the evolution of fiscal policy as well as future measures regarding economic policy and their possible effects on macroeconomic imbalances in the country, among others, are factors that generate uncertainty and affect risk premia, the exchange rate, investment, and the country’s economic activity. Interest rates at several of the world’s main central banks continue to rise, some at a pace higher than expected by the market. This is in response to the high levels of inflation and their inflation expectations, which continue to exceed the targets. Thus, global growth projections are still being moderated, risk premia have risen, and the dollar continues to gain strength against other main currencies. International pressures on global inflation have heightened. In the United States, core inflation has not receded, pressured by the behavior of the CPI for services and a tight labor market. Consequently, the U.S. Federal Reserve continued to increase the policy interest rate at a strong pace. This rate is expected to now reach higher levels than projected in the previous quarter. Other developed and emerging economies have also increased their policy interest rates. Thus, international financial conditions have tightened significantly, which reflects in a widespread strengthening of the dollar, increases in worldwide risk premia, and the devaluation of risky assets. Recently, these effects have been stronger in Colombia than in the majority of its peers in the region. Considering all of the aforementioned, the technical staff of the bank increased its assumption regarding the U.S. Federal Reserve’s interest rate, reduced the country’s external demand growth forecast, and raised the projected trajectory for the risk premium. The latter remains elevated at higher levels than its historical average, within a context of high local uncertainty and of extensive financing needs from the foreign sector and the public sector. All of this results in higher inflationary pressures associated to the depreciation of the Colombian peso. The uncertainty regarding external forecasts and its impact on the country remain elevated, given the unforeseeable evolution of the conflict between Russia and Ukraine, of geopolitical tensions, and of the tightening of external financial conditions, among others. A macroeconomic context of high inflation, inflation expectations and forecasts above 3%, and a positive output gap suggests the need for contractionary monetary policy, compatible with the macroeconomic adjustment necessary to eliminate excess demand, mitigate the risk of unanchoring in inflation expectations, and guarantee convergence of inflation at the target. In comparison with the July report forecasts, domestic demand has been more dynamic, with a higher observed output level that surpasses the economy’s productive capacity. Headline and core inflation have registered surprising rises, associated with the effects of domestic and external price shocks that were more persistent than anticipated, with excess demand and indexation processes in some CPI groups. The country’s risk premium and the observed and expected international interest rates increased. As a consequence of this, inflationary pressures from the exchange rate rose, and in this report, the probability of the neutral real interest rate being higher than estimated increased. In general, inflation expectations for all terms and the bank’s technical staff inflation forecast for 2023 increased again and continue to stray from 3%. All of the aforementioned elevated the risk of unanchoring inflation expectations and could heighten widespread indexation processes that push inflation away from the target for a longer time. In this context, it is necessary to consolidate a contractionary monetary policy that tends towards convergence of inflation at the target in the forecast horizon and towards the reduction of excess demand in order to guarantee a sustainable output level trajectory. 1.2 Monetary policy decision In its September and October of 2022 meetings, Banco de la República’s Board of Directors (BDBR) decided to continue adjusting its monetary policy. In September, the BDBR decided by a majority vote to raise the monetary policy interest rate by 100 basis points (bps), and in its October meeting, unanimously, by 100bps. Therefore, the rate is at 11.0%. Boxes 1 Food inflation: a comparison with other countries

Macroeconomic summary The Colombian economy sustained numerous shocks in the second quarter, pri¬marily related to costs and supply. The majority of these shocks were unantic¬ipated or proved more persistent than expected, interrupting the recovery in economic activity observed at the beginning of the year and pushing overall inflation above the target. Core inflation (excluding food and regulated items) increased but remained low, in line with the technical staff’s expectations. A third wave of the pandemic, which became more severe and prolonged than the previous outbreak, began in early April. This had both a high cost in terms of human life and a negative impact on Colombia's economic recovery. Between May and mid-June roadblocks and other disruptions to public order had a sig¬nificant negative effect on economic activity and inflation. The combination and magnitude of these two shocks likely led to a decline in gross domestic product (GDP) compared to the first quarter. Roadblocks also led to a significant in¬crease in food prices. The accumulated effects of global disruptions to certain value chains and increased international freight transportation prices, which since the end of 2020 have restricted supply and increased costs, also affected Colombia’s economy. The factors described above, which primarily affected the consumer price index (CPI) for goods and foods, explain to a significant degree the technical staff’s forecast errors and the increase in overall inflation above the 3% target. By contrast, increases in core inflation and in prices for regulated items were in line with the technical staff’s expectations, and can be explained largely by the elimination of various price relief measures put in place last year. An increase in perceived sovereign risk and the upward pressures that this im¬plies on international financing costs and the exchange rate were further con¬siderations. Despite significant negative shocks, economic growth in the first half of the year (9.1%) is now expected to be significantly higher than projected in the April re¬port (7.1%), a sign of a more dynamic economy that could recover more quickly than previously forecast. Diverse economic activity figures have indicated high¬er-than-expected growth since the end of 2020. This suggests that the negative effects on output from recurring waves of COVID-19 have grown weaker and less long-lasting with subsequent outbreaks. Nevertheless, the third wave of the coro¬navirus, and to an even greater degree the previously mentioned roadblocks and disruptions to public order, likely led to a decline in GDP in the second quar¬ter compared to the first. Despite this, data from the monthly economic tracking indicator (ISE) for April and May surpassed expectations, and new sector-level measures of economic activity suggest that the negative impact of the pandemic on output continues to moderate, amid reduced restrictions on mobility and im¬provements in the pace of vaccination programs. Freight transportation registers (June) and unregulated energy demand (July), among other indicators, suggest a significant recovery following the roadblocks in May. Given the above, annual GDP growth in the second quarter is expected to have been around 17.3% (previously 15.8%), explained in large part by a low basis of comparison. The technical staff revised its growth projection for 2021 upward from 6% to 7.5%. This forecast, which comes with an unusually high degree of uncertain¬ty, assumes no additional disruptions to public order and that any new waves of COVID-19 will not have significant additional negative effects on economic activity. Recovery in international demand, price levels for some of Colombia’s export com¬modities, and remittances from workers abroad have all performed better than projected in the previous report. This dynamic is expected to continue to drive recovery in the national income over the rest of the year. Continued ample international liquidity, an acceleration in vacci¬nation programs, and low interest rates can also be ex¬pected to favor economic activity. Improved performance in the second quarter, which led to an upward growth revision for all components of spending, is expected to continue, with the economy returning to 2019 production levels at the end of 2021, earlier than estimated in the April report. This forecast continues to account for the short-term effects on aggregate demand of a tax reform package along the lines of what is currently being pro-posed by the national government. Given the above, the central forecast scenario in this report projects growth in 2021 of 7.5% and in 2022 of 3.1% (Graph 1.1). In this scenar¬io, economic activity would nonetheless remain below potential. The noted improvement in these projections comes with a high degree of uncertainty. Annual inflation increased more than expected in June (3.63%) as a result of changes in food prices, while growth in core inflation (1.87%) was similar to projections.

In the second quarter, annual inflation (9.67%), the technical staff’s projections and its expectations continued to increase, remaining above the target. International cost shocks, accentuated by Russia's invasion of Ukraine, have been more persistent than projected, thus contributing to higher inflation. The effects of indexation, higher than estimated excess demand, a tighter labor market, inflation expectations that continue to rise and currently exceed 3%, and the exchange rate pressures add to those described above. High core inflation measures as well as in the producer price index (PPI) across all baskets confirm a significant spread in price increases. Compared to estimates presented in April, the new forecast trajectory for headline and core inflation increased. This was partly the result of greater exchange rate pressure on prices, and a larger output gap, which is expected to remain positive for the remainder of 2022 and which is estimated to close towards yearend 2023. In addition, these trends take into account higher inflation rate indexation, more persistent above-target inflation expectations, a quickening of domestic fuel price increases due to the correction of lags versus the parity price and higher international oil price forecasts. The forecast supposes a good domestic supply of perishable foods, although it also considers that international prices of processed foods will remain high. In terms of the goods sub-basket, the end of the national health emergency implies a reversal of the value-added tax (VAT) refund applied to health and personal hygiene products, resulting in increases in the prices of these goods. Alternatively, the monetary policy adjustment process and the moderation of external shocks would help inflation and its expectations to begin to decrease over time and resume their alignment with the target. Thus, the new projection suggests that inflation could remain high for the second half of 2022, closing at 9.7%. However, it would begin to fall during 2023, closing the year at 5.7%. These forecasts are subject to significant uncertainty, especially regarding the future behavior of external cost shocks, the degree of indexation of nominal contracts and decisions made regarding the domestic price of fuels. Economic activity continues to outperform expectations, and the technical staff’s growth projections for 2022 have been revised upwards from 5% to 6.9%. The new forecasts suggest higher output levels that would continue to exceed the economy’s productive capacity for the remainder of 2022. Economic growth during the first quarter was above that estimated in April, while economic activity indicators for the second quarter suggest that the GDP could be expected to remain high, potentially above that of the first quarter. Domestic demand is expected to maintain a positive dynamic, in particular, due to the household consumption quarterly growth, as suggested by vehicle registrations, retail sales, credit card purchases and consumer loan disbursement figures. A slowdown in the machinery and equipment imports from the levels observed in March contrasts with the positive performance of sales and housing construction licenses, which indicates an investment level similar to that registered for the first three months of the year. International trade data suggests the trade deficit would be reduced as a consequence of import levels that would be lesser than those observed in the first quarter, and stable export levels. For the remainder of the year and 2023, a deceleration in consumption is expected from the high levels seen during the first half of the year, partially as a result of lower repressed demand, tighter domestic financial conditions and household available income deterioration due to increased inflation. Investment is expected to continue its slow recovery while remaining below pre-pandemic levels. The trade deficit is expected to tighten due to projected lower domestic demand dynamics, and high prices of oil and other basic goods exported by the country. Given the above, economic growth in the second quarter of 2022 would be 11.5%, and for 2022 and 2023 an annual growth of 6.9% and 1.1% is expected, respectively. Currently, and for the remainder of 2022, the output gap would be positive and greater than that estimated in April, and prices would be affected by demand pressures. These projections continue to be affected by significant uncertainty associated with global political tensions, the expected adjustment of monetary policy in developed countries, external demand behavior, changes in country risk outlook, and the future developments in domestic fiscal policy, among others. The high inflation levels and respective expectations, which exceed the target of the world's main central banks, largely explain the observed and anticipated increase in their monetary policy interest rates. This environment has tempered the growth forecast for external demand. Disruptions in value chains, rising international food and energy prices, and expansionary monetary and fiscal policies have contributed to the rise in inflation and above-target expectations seen by several of Colombia’s main trading partners. These cost and price shocks, heightened by the effects of Russia's invasion of Ukraine, have been more prevalent than expected and have taken place within a set of output and employment recovery, variables that in some countries currently equal or exceed their projected long-term levels. In response, the U.S. Federal Reserve accelerated the pace of the benchmark interest rate increase and rapidly reduced liquidity levels in the money market. Financial market actors expect this behavior to continue and, consequently, significantly increase their expectations of the average path of the Fed's benchmark interest rate. In this setting, the U.S. dollar appreciated versus the peso in the second quarter and emerging market risk measures increased, a behavior that intensified for Colombia. Given the aforementioned, for the remainder of 2022 and 2023, the Bank's technical staff increased the forecast trajectory for the Fed's interest rate and reduced the country's external demand growth forecast. The projected oil price was revised upward over the forecast horizon, specifically due to greater supply restrictions and the interruption of hydrocarbon trade between the European Union and Russia. Global geopolitical tensions, a tightening of monetary policy in developed economies, the increase in risk perception for emerging markets and the macroeconomic imbalances in the country explain the increase in the projected trajectory of the risk premium, its trend level and the neutral real interest rate1. Uncertainty about external forecasts and their consequent impact on the country's macroeconomic scenario remains high, given the unpredictable evolution of the conflict between Russia and Ukraine, geopolitical tensions, the degree of the global economic slowdown and the effect the response to recent outbreaks of the pandemic in some Asian countries may have on the world economy. This macroeconomic scenario that includes high inflation, inflation forecasts, and expectations above 3% and a positive output gap suggests the need for a contractionary monetary policy that mitigates the risk of the persistent unanchoring of inflation expectations. In contrast to the forecasts of the April report, the increase in the risk premium trend implies a higher neutral real interest rate and a greater prevailing monetary stimulus than previously estimated. For its part, domestic demand has been more dynamic, with a higher observed and expected output level that exceeds the economy’s productive capacity. The surprising accelerations in the headline and core inflation reflect stronger and more persistent external shocks, which, in combination with the strength of aggregate demand, indexation, higher inflation expectations and exchange rate pressures, explain the upward projected inflation trajectory at levels that exceed the target over the next two years. This is corroborated by the inflation expectations of economic analysts and those derived from the public debt market, which continued to climb and currently exceed 3%. All of the above increase the risk of unanchoring inflation expectations and could generate widespread indexation processes that may push inflation away from the target for longer. This new macroeconomic scenario suggests that the interest rate adjustment should continue towards a contractionary monetary policy landscape. 1.2. Monetary policy decision Banco de la República’s Board of Directors (BDBR), at its meetings in June and July 2022, decided to continue adjusting its monetary policy. At its June meeting, the BDBR decided to increase the monetary policy rate by 150 basis points (b.p.) and its July meeting by majority vote, on a 150 b.p. increase thereof at its July meeting. Consequently, the monetary policy interest rate currently stands at 9.0% . 1 The neutral real interest rate refers to the real interest rate level that is neither stimulative nor contractionary for aggregate demand and, therefore, does not generate pressures that lead to the close of the output gap. In a small, open economy like Colombia, this rate depends on the external neutral real interest rate, medium-term components of the country risk premium, and expected depreciation. Box 1: A Weekly Indicator of Economic Activity for Colombia Juan Pablo Cote Carlos Daniel Rojas Nicol Rodriguez Box 2: Common Inflationary Trends in Colombia Carlos D. Rojas-Martínez Nicolás Martínez-Cortés Franky Juliano Galeano-Ramírez Box 3: Shock Decomposition of 2021 Forecast Errors Nicolás Moreno Arias