Colombia’s economy has recovered remarkably well from the COVID-19 crisis, and strong ﬁscal and monetary policy support have averted a stronger contraction of incomes. Solid macroeconomic policy frameworks are laying the grounds for a continuous recovery of domestic demand, although the sustainability of ﬁscal accounts will require further action. In a longer view, however, both growth and social inclusion are trapped by weak structural policy settings that preclude more than half of income earners from formal jobs and social protection, while preventing ﬁrms from growing and becoming more productive. Solving this vicious circle through ambitious reforms would allow a signiﬁcant leap forward for material well-being in Colombia.
After surpassing its pre-crisis level in the third quarter of 2021, GDP is projected to grow by 5.5% in 2022 and 3.1% in 2023. Private consumption is the main driver of the recovery as employment picks up, although at a slower pace than economic activity. Vaccine coverage has made significant progress, but is trailing behind regional peers. Strong commodity prices and improving prospects in key main trading partners will continue to underpin exports.
The pandemic is likely to lead to higher informality, inequality and poverty - reversing years of improvement. Low-quality basic and professional education often disconnected from labour market needs, large connectivity gaps and high regional inequalities need to be addressed in order to tackle informality and boost growth and employment in the medium-term.
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