Reflections on Upcoming Monetary Poverty Results in Colombia.

According to official sources, monetary poverty results for 2.023 establish that monetary poverty and extreme monetary poverty are measured as follows: the former is the population whose monthly per capita income is in the range of $0 to $435.375, and the latter is between $0 and $218.846.

Thus, those classified as poor represent 33% of the population, and those living in extreme poverty represent 11.4%.

Also, apart from the poor, another segment of the population is vulnerable, representing 31.5% of the population. The middle class and the upper class represent 32.4% and 3.1%, respectively. This means that the poor and vulnerable populations total 64.5% of the Colombian population.

The vulnerable population mentioned is that whose monthly per capita income falls between the poverty line (the upper limit of the poor at $435.375) and $853.608. The middle class falls between $853.608 and $4.596.352 per capita. The upper class corresponds to per capita incomes above $4.596.352.

An update of the previous results will be published this afternoon, and the official source will report the information corresponding to the year 2024. This information is being published seven months after the end of 2024, when all the data for that year are already known, such as inflation at 5.2%, unemployment at 9.1%, the Banco de la República rate at 9.5%, and GDP at 1.7%. These are all better results than those of 2023, when inflation was 9.3%, unemployment was 10%, the Central Bank's interest rate was 13%, and GDP was 0.6%.2/

Therefore, with these 2024 results being better than those of 2.023, it is reasonable to expect that the population in monetary poverty should decrease in 2.024 compared to the 33% observed in 2.023. Indeed, the drop in inflation from 9.3% to 5.2% benefits the poor more than the rest due to their low income levels, which allows some of this population to be lifted out of poverty. Lower unemployment, from 10% to 9.1%, can also lead to lower poverty levels. Finally, a GDP growth from 0.6% to 1.7% also has positive effects on income. Additionally, increases in monetary transfers from the national and city governments also have an impact.3/

A poverty reduction result obtained between 2022 and 2023 indicates that poverty fell from 36% in the first year to 33% in the second, a decrease of 3 percentage points. An equal or greater reduction is expected for 2.024.4/

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1/ The official source may advance the preparation and presentation of the monetary poverty report to march instead of july, as these results need to be known in a more timely manner.

2/ On the contrary, the fiscal deficit between 2.023 and 2.024 increased from -4.2% to -6.7%, and the fiscal rule was suspended for the current year, with the consequent adverse effects on the country's risk rating.

3/ While poverty can be reduced with the aforementioned indicators, the same cannot be said for inequality, since for there to be an impact, a fiscal policy with targeted taxation of high incomes is necessary, allowing for greater income redistribution.

4/ The country has established an inflation target, which is the focus of decisions made by the monetary authority. Targets must also be set for unemployment and monetary poverty. Unemployment is 6% and monetary poverty is 20%, figures that are in line with other OECD countries. Targets must also be set to reduce inequality, whose Gini coefficient is high at 0.55. These targets are included in the Development Plans drawn up at the beginning of presidential terms and are periodically monitored in technical meetings, as is done with inflation targets.