Littérature scientifique sur le sujet « Politics of housing »

This exchange considers the unrecognised interplay between two major political–economic trends shaping contemporary Europe, namely the upward trend in housing-induced inequalities and rising support for populist politics. Europe's housing systems have undergone dramatic transformations in recent decades that are exacerbating housing precarity, wealth inequalities and socio-spatial polarisation. At the same time, European politics has witnessed a growing acceptance of populist political rhetoric, values and policies as populists exploit citizens' economic anxieties and perceived cultural grievances. Yet, existing research overlooks the connections between housing system dynamics, housing precarity and political disaffection. In response, this exchange proposes a new approach – housing discontent – to capture how deepening housing precarity and place inequalities are influencing social attitudes, political values and preferences and resulting in a more polarised contemporary politics.

Owning a house is the most important economic choice most families will ever make. Yet, our understanding of the political causes and consequences of homeownership is rather thin. This review argues that political scientists need to take housing much more seriously, not least because of the unprecedented surges and collapses of house prices over the past two decades. The housing market is both a proxy for and a cause of growing social cleavages that shape how citizens view political issues from the size of the welfare state to the attractiveness of populist campaigns. The article begins by re-examining classic work on property from the nineteenth century as a still-relevant guide to the winners and losers from property market shocks and regulations. It then turns to the postwar era and work that suggests that the welfare state and property ownership are in some sense substitutes. It concludes by examining the role housing plays in shaping contemporary political preferences, both as a direct measure of individuals' wealth and welfare and as a proxy for the relative fortunes of different places.

From its creation as a military housing development to its ultimate transformation into private housing, Linda Vista, in San Diego, ran the ideological spectrum—ranging from a foil for alleged communism, to a repository for proto Right Wing conservatism—simultaneously revealing burgeoning sunbelt politics and the conflict between the housing needs of military families and the anti-public housing ethos of the city's political class. Though the Navy required such projects to house its service personnel and their dependents, the city and many residents sought to eliminate public housing. Linda Vista also demonstrates the intersection of military housing, race, and local politics. For the left, it served as a fortress of political support in the 1940s, but by the 1950s, Linda Vista came to be a Republican stronghold. Ultimately, Linda Vista's shift previewed the New Right conservatism that Sunbelt metropolises would promote in the latter half of the twentieth century.

While the economic implications of housing have been examined extensively, surprisingly limited attention has been devoted to how the housing market impacts politics. My dissertation is a three paper compilation that addresses the relationship between housing and politics. Taken together, this dissertation traces through the ways in which housing plays a role in American political life, from preference formation to concrete participatory outcomes such as voting and writing to legislators. In my first paper, Unemployment Shocks, Housing Wealth and Political Preferences, I demonstrate that housing has micro-economic implications for the way people smooth over income shocks. I find that people in counties which experience an unexpected unemployment shock finance that shock using mortgage loans, and that there is a life-cycle aspect to such financing. I also find that people perceive social insurance and home equity as substitutes, but only when access to home equity is relatively high. My second paper, Lending Support: Agency MBS Issuance and Rewarding Incumbents, examines how a shock to housing wealth affects electoral outcomes. I demonstrate that after experiencing a large increase in mortgage credit post-2000, low-income counties were more likely to support their incumbents. This effect principally pertains to Democratic incumbents, who were particularly vocal in advocating for the maintenance of these loosened credit conditions, and used these conditions to claim credit for providing access to housing in poorer counties. Finally, my third paper, Local Economic Information, Foreclosure and Political Attitudes, delves into the cognitive role that housing plays in making individual political behavioral decisions. I find that reading about or seeing a photo of a foreclosed house makes respondents more likely to send a strongly worded letter to their Member of Congress, whereas seeing a photo of a foreclosed house is about twice as likely to make respondents express interest in engaging with their local community. I also find that seeing a photo of a foreclosure and reading about foreclosures serve as almost perfect substitutes.
Government

Throughout the 20th century, millions of people immigrated to California in search of sunny weather, economic opportunity, and affordable housing. However, since the 1970s, Californians’ economic mobility has dissipated under a persistent affordable housing shortage. This thesis examines the affordable housing crisis and the political and economic incentives underpinning it. In surveying the historical evolution of state and local land use planning since the early 20th century, this thesis analyzes the effects of policy changes on housing supply in the Bay Area and Greater Los Angeles. It argues that California’s land use planning framework limits housing supply by prioritizing homeowner interests, and concludes with policy recommendations to align this framework with regional and state housing goals.

This research investigates housing-led regeneration in the post-industrial area of East Durham to examine whether a gap exists between policy expectation and regeneration, on-the-ground. By engaging with the themes of uneven development and stigma and marginality, the thesis argues that housing-led regeneration policies have exacerbated already existing unevenness and marginality, in their bid to regenerate areas and promote sustainability. This process is played out in the face of shifting economic and political issues. The housing and wider economic market boom of the early to mid 2000’s witnessed a shift in the emphasis placed on housing as a driver to renewal in East Durham; an approach which was sharply hit by the housing market slump, credit crunch and accompanying austerity measures. These funding cuts placed a greater emphasis on the private sector to fund (amongst other things) housing. In addition a rescaling of governing structures from regional and local authority to sub-regional has, the research contends, further influenced and shaped uneven development and marginality. Through the lens of post-political theory, this thesis engages with the relationships between those involved in housing-led regeneration to examine conflict within the process, to show how consensus is managed. Empirical data was gathered using the case study of East Durham. This involved the examination of secondary data in the form of government publications, official statistics, and media reports. The data is derived from extensive, in-depth interviewing of a sample of representatives from County Durham Unitary Council; builders and developers; private surveyors and planners; private landlords; social housing providers; property managers; central government agents; and third sector representatives. A range of county, local and community meetings and forums were attended to provide an ethnographic insight into the process of governing and the relationships which exist within the area.

In the early 2000s, Chicago emerged as an archetypal city in the broader movement to remake public housing. Chicago’s Plan for Transformation committed upwards of $1.5 billion to demolish high-rise buildings, rehabilitate a portion of existing stock, and create 12 new mixed-income developments on the footprint of public housing sites. Policy incentives—such as financing for capital development, long-term rental subsidies, and public land transfers—aimed to encourage public-private partnerships. During the 2008 economic crisis and its aftermath, however, the promised transformation proved financially difficult—if not impossible in certain geographic areas—to complete at the scale intended. That shift in the economic context, along with subsequent political responses, thoroughly altered the policy strategy. To date few empirical investigations have analyzed how these changes restructured the very nature of public housing reforms, and what this restructuring means for policies that require market intervention for the provision of public goods. This dissertation performs just that empirical analysis.

Privatizing Chicago examines the city’s public housing reforms as an example of “actually existing” (Brenner & Theodore, 2002) neoliberal urbanism and explains how specific political actors, processes, and institutions altered market-based policies intended to reshape urban poor neighborhoods. Viewing Chicago as a neoliberal city requires both recognizing its political landscape as one where the primary aim of municipal government is to promote an entrepreneurial agenda that positions the economic success of the city above all other interests, as well as viewing the potential for progressive movements to contest this agenda. Prior to this study, Chicago’s reforms had not been examined across time or geographic areas using critiques of neoliberal urbanism, nor through qualitative methods. This study fills that gap and uses the case of Chicago to improve the empirical understanding of neoliberal urbanism more generally.

The study accomplishes this through a case study of Chicago’s public housing reforms between 2000 to 2016. It shows how government officials, real estate developers, bankers, lawyers, planners, grassroots activists, and others pursued policy strategies favorable to their interests over a 16-year period—a time marked by the economic recession. My methodological approach is a theory-driven form of ethnography, and my analysis draws from 61 in-depth interviews, field observations over 22 months, archival research of over 500 documents, and the analysis of financial data. This approach brought to light the multiple and contradictory visions at work within the neoliberal framework: competing ideas of the proper partnerships between the public and private sectors, shifting authority among local and national government agencies, and struggles for community redevelopment on the land where high-rises once stood.

In probing these conflicts and contradictions, I argue that the overall effect of the reforms was to burnish Chicago’s status as a “global city,” but it also contributed to land appropriation, capital accumulation, and the displacement of thousands of low-income African-American residents. The cycle of government intervention into market failure will continue as long as the role of the state remains dominated by an agenda of capital expansion, rather than of equitable urban development that ensures a place for low-income, predominately racial minority communities to live. Theoretical contributions related to neoliberal urbanism align around four themes: (a) political agency and resistance; (b) privatization and financialization; (c) local state control, federal devolution, and global processes; and (d) the relevance of race. A set of policy implications drives towards recommendations regarding affordable housing policy, democratic governance arrangements, collective action focused on social justice, and market-based policy strategies.

In the 1970s, rapid modernisation fuelled population displacement and increased the number of workers in the large cities of Iran, in particular Tehran. In response, the Imperial Government initiated several housing programs focusing on the provision of megastructures on a large scale. Consequently, a new opposition formed among some sectors of society, regarding the dissemination of gigantic buildings in the International or Brutalist styles. Critics and clerics argued that the radical government interventions not only polarised the image of Islamic identity in cities, but also affected the behaviour of people towards, and their opinions concerning, the Islamic lifestyle. Additionally, some claimed the state aimed to normalise its project of modernity and rapid westernisation for the mid- and lower classes using housing. In this regard, this article investigates the 1970s imperial government social housing programs to verify these claims. Using an extensive literature review, documentary research, observation, and descriptive data analysis, this article argues that, despite the government politics and modernisation tendencies in the 1970s, consumerism, political competition, the state of Cold War, and the emergence of new construction techniques, all resulted in the emergence of mass-produced megastructures offering a new luxurious lifestyle to residents. While the life and hygiene of the different classes were improved, these instant products inevitably facilitated the normalisation of Western lifestyle among the mid- and low-income groups of the society. Eventually, this visible social transition was utilised by opposition leaders as another excuse to topple the Pahlavi regime under the 1979 Islamic Revolution.

The Cuban Revolution’s neglect of Havana (as part of a broader socialist project) simultaneously ruined and preserved its architectural and urban fabric. On one hand, Havana is crumbling, its fifty-plus year lack of maintenance inscribed on its cracked, decayed surfaces and the voids where buildings once stood; on the other, its formal urban fabric—its scale, dimensions, proportions, contrasts, continuities, solid/void relationships, rhythms, public spaces, and landscapes—remain intact. A free-market Cuba, while inevitable, leaves the city vulnerable to unsustainable urban development. And while many anticipate preservation, restoration, and urban development—particularly of Havana’s historic core (La Habana Vieja)—”business as usual” preservation practices resist rampant (read: neoliberal) development primarily through narrow strategies of exclusion (where, what, how, and why not to build), museumizing Havana as “a city frozen in time.”Seeking a third option at the intersection of this socialist/capitalist divide, this paper describes 4 student projects from THE CUBA STUDIO, a collaborative Integrative Urban Studio at Marywood University’s School of Architecture. Over the course of 16 weeks, students in THE CUBA STUDIO speculated urban futures for a post-revolutionary Havana–strategizing ways of preserving Havana’s architectural and urban fabric in the face of an emerging political and economic shift that is opening, albeit gradually, Cuba to global market forces. And rather than submitting to these forces, the work critically engages them toward socio-cultural ends. Some driving questions were: What kind of spatial politics do we deploy while retrofitting Havana? How will the social, political, and economic changes of an “open” Cuba affect Havana’s urban fabric? What role does preservation play? For that matter, what does preservation really mean and by what criteria are sites included in the preservation frame? What relationships are there (or could there be) between preservation, tourism, infrastructure, education, housing, and public space? In the process, students established systematic research agendas to reveal opportunities for integrated“soft” and “hard” interventions (i.e. siting and programing), constructing ecologies across a range of disciplinary territories including (but not limited to): architecture, urban design, historic preservation/ restoration, art, landscape urbanism, infrastructure,science + technology, economics, sustainability, urban policy, sociology, and cultural/political theory. An explicit goal of the studio was to expand and leverage“preservation” (as an idea, a discipline, and a practice) toward flexible and inclusive design strategies that frame precise architectural interventions at a range of temporal and geographic scales.

Las políticas habitacionales construyen parte de la ciudad, materializando un hecho urbano. En base a la experiencia transitada en la implementación del Plan Federal de Construcción de Viviendas en la Provincia de Buenos Aires podemos leer efectos dispares en las ciudades y en la vida de las personas. La localización de las viviendas y el suelo utilizado fueron insumos utilizados para verificar si, en tanto política social, la política habitacional actúa redistribuyendo renta urbana, mejorando la localización de la población en la estructura urbana. En este trabajo nos proponemos problematizar a la política habitacional, como parte de la política urbana, analizando tensiones y relaciones. Apoyados en la mediación que nos propone el PFCV, indagamos en la implementación de la política en la Provincia de Buenos Aires. Algunos municipios han llevado adelante algunas estrategias novedosas saldando experiencias y aportando un camino en pos de implementación de políticas habitacionales enmarcadas en políticas urbanas integrales. Housing policies are part of the city, an urban fact materialize. Based on the busy experience in implementing the Federal Housing Construction Plan in Provincia of Buenos Aires we read different effects in cities and in the lives of people. The location of houses and land used were used to verify whether, as social policy, housing policy inputs urban acts redistributing income, better localization of the population in the urban structure. In this paper we propose to problematize the housing policy, as part of urban policy, analyzing tensions and relationships. Supported in mediation is proposed in the PFCV, we investigate the implementation of the policy in the Province of Buenos Aires. Some locals governments have carried out some new strategies settling experiences and providing a path towards implementation of housing policies framed in comprehensive urban policy.

There is a small but growing body of literature that discusses the benefits, challenges and opportunities of intersectional responses to the socioeconomic impacts of the Covid-19 pandemic. There is a strong body of evidence pointing to the disproportionate impact of Covid-19 borne by women, who have suffered record job losses, been expected to take on even greater unpaid care burdens and home schooling responsibilities, and faced a “shadow pandemic” of violence against women and girls. However, gender inequalities cannot be discussed in isolation from other inequalities. Emerging literature stresses the importance of a Covid-19 recovery plan that addresses how gender intersects with class, race, disability, age, sexual orientation, geography, immigration status and religion or belief, and other factors such as employment, housing (and homelessness) and environmental and political stressors.

Economic reasons are among the basic explanatory factors of migration, whether international or internally within a country. In turn, migratory movements have effects on the economy in terms of economic growth in general, but also in the different markets (work, housing, consumer goods, etc.) and public services (education, health, social services, etc.). The purpose of this document is to offer an overview of these interactions between migration and the economy in the case of the Canary Islands. To do this, certain conceptual clarifications will be made initially involving the mutual determination of both processes, before later providing specifics with evidence on the Canarian case for the main issues considered: the economic reasons for migration, and its impact on economic growth, the labour market and the living conditions of the immigrant population. The final section alludes to the importance of the institutional framework that regulates these relations between migration and the economy, which are far from being interpretable as a mechanical relationship and isolated from the political sphere.

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%.

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