Economic growth slowed in 2015 due to the fall in commodity prices, but is projected to gradually recover in 2016 and 2017 with investment and non-oil exports recovering. The sharp devaluation of the peso and the effect of El Niño have pushed inflation above the central bank’s target range. The peace talks set to conclude end-March 2016 will boost confidence and generate investment and jobs. Inequality and relative poverty have declined but remain high.
Monetary policy is assumed to move towards a neutral stance as the effect of El Niño on inflation should be temporary and the still negative output gap will contain price pressures. Fiscal consolidation in line with the fiscal rule is appropriate to maintain confidence. Reducing widespread informality by upgrading the quality of education and limiting the increase of the relatively high minimum wage would raise productivity and make growth more inclusive.
Colombia’s contribution to global warming has been low so far, but the expansion of extractive industries, urbanisation, road traffic and livestock grazing all pose challenges if decisive action is not taken. Colombia aims at generating 77% of energy from renewable sources by 2020 and reducing greenhouse gas emissions by at least 20% by 2030.