Economic outlook, analysis and forecasts

Colombia - Economic forecast summary (November 2016)

 

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Economic growth is projected to pick up in 2017 and 2018, driven by stronger external demand and a recovery in agriculture following the end of El Niño. The current account deficit remains high, but is projected to narrow gradually as the sharp peso depreciation contains imports and spurs non-traditional exports. Inequalities remain high despite a slight decline in unemployment.


Inflation remains high but is declining as the effects of temporary shocks, such as the past depreciation and weather-related agricultural price hikes, have started to wane. The central bank raised interest rates earlier in the year and managed successfully to contain inflation expectations. Monetary policy can ease gradually as inflation continues to decline. Approving the financial conglomerates law can help reduce risks. Structural reforms in education, health and infrastructure, and reducing informality with reforms in non-wage labour costs, should make growth broader based and more inclusive.


Fiscal consolidation should continue, in line with the fiscal rule, to maintain credibility. The economic slowdown and the fall in oil prices have cut revenues, while peso depreciation has pushed up debt and interest spending. Revenues are projected to decrease further in the medium term as temporary taxes expire. The government has responded by introducing a comprehensive tax reform, and by reducing public spending and investment. The approval of the tax reform by the legislative assembly is crucial to raise revenues, boost growth and deal with social challenges.

 

 

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Other information

Economic Assessment of Colombia (survey page))

 

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