GDP is projected to grow by 6.1% in 2022 and 2.1% in 2023. Private consumption is the main driver of the recovery, driven by a gradual pick-up of employment. Strong commodity prices have improved the terms of trade and are supporting fiscal outcomes, against the background of rising external demand. Inflation has risen well above target, initially driven by food and energy prices, which have particularly affected low-income households. More recently, however, inflationary pressures have become increasingly widespread.
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.
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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