Economic outlook, analysis and forecasts

Colombia - Economic forecast summary (June 2016)


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Economic growth will continue to moderate in 2016, reflecting weak external conditions, low commodity prices and a slowdown in internal demand, but it will strengthen to 3% in 2017, as external demand recovers and the government’s infrastructure agenda is implemented. The current account deficit remains high and inflation is accelerating due to exchange rate depreciation and rising food prices resulting from El Niño. As the effects of these shocks dissipate, inflation will gradually come down in 2017.

Monetary policy has appropriately become less accommodative to anchor inflation expectations. Credit growth has weakened but inflation expectations remain high. The announced cut in public spending is appropriate to contain the headline fiscal deficit, but a comprehensive tax reform is required to increase progressivity, boost revenues and reduce the large inequalities in incomes.

Productivity growth has declined in recent years. Strengthening competitiveness through simplified customs procedures, infrastructure investment and streamlined regulation are needed to improve productivity in the medium term. The plans to broaden access to quality education will also contribute to productive transformation and allow the fruits of growth to be shared more equitably, increasing social cohesion. Reaching an agreement on the peace talks is crucial to boost confidence and investment.


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