Overview

  • President Juan Manuel Santos began his second term in office on August 7th, 2014, which will end on August 7, 2018. After four years of negotiation and the approval of the six points of the agenda agreed in 2012 the Colombian Congress approved on 30 November 2016 the new peace agreement between the Government of Colombia and the Revolutionary Armed Forces of Colombia (FARC-EP - Fuerzas Armadas Revolucionarias de Colombia-Ejercito del Pueblo). The agreement was signed on November 24 by President Santos and FARC leader, Rodrigo Londoño 'Timochenko', in Bogotá.

    The Government and the FARC-EP initiated a definitive bilateral cease-fire on 29 August 2016, while the mobilization of the different FARC structures to the location areas covered by the agreement ended on February 18, 2017. During the concentration of the guerrillas, the process of abandoning the weapons was complete, which was verified by the UN Mission in Colombia.

    Also, after three years of exploratory talks, the peace negotiation table between the Government and the National Liberation Army (ELN - Ejército de Liberación Nacional) was formally installed in Quito, on February 7, 2017. The delegations will address a six-point agenda: participation of society in peacebuilding process; democracy for peace; transformation for peace; victims; end of armed conflict; and implementation.

    The economic adjustment to the major oil shock continued in 2016 and economic growth slowed to 2 percent. Colombia has faced one of the largest terms-of-trade shocks in the region and in its history, estimated at about 4 percent of its Gross Domestic Product (GDP).

    Nevertheless, the Colombian economy has been resilient to this shock, supported by the macroeconomic and structural reforms that have been implemented in recent years. In 2016, private consumption contributed growth, although at a slower rate than expected. The economic outlook was weaker, especially for the extractive industries, due to greater uncertainty and slow implementation in publicly financed projects, which caused a decline in investment. As a result of fiscal consolidation efforts, public consumption growth also slowed. The weakness of domestic demand and the strong depreciation of the currency led to a sharp contraction in imports. As a result, despite a marginal decline in exports, net exports contributed 1.6 percentage points to economic growth.

    The services sector remained the main contributor to growth due to the dynamism of financial, commercial and construction services, which partially offset the fall in the extractive sector. For its part, the agricultural sector was affected by the El Niño phenomenon.

    Growth has been somewhat weaker than expected in the first half of 2017, with confidence effects weighing on private consumption and investment, and weak external demand and competitiveness issues affecting export performance. Private consumption expanded at a pace of 1.5 percent during this period, even as inflation decelerated. Weak domestic demand, weak prospects for the extractive industries, and delays in the execution of publicly funded projects kept investment flat. Notwithstanding fiscal consolidation efforts, government consumption expanded at a similar pace as in 2016. Despite subdued import growth, reflecting softer domestic demand, net exports weighed on growth, as exports contracted 3.2 percent in the first half of the year.

    Agriculture, which is recovering from the El Niño phenomenon, grew at 6 percent in the first half of 2017, and dynamism in financial services, and social, communal and personal services continued. Performance

    in other sectors of the economy, it was not as expected. The slump in the extractives sector continued, as oil production continued to decline, while manufacturing and construction contracted 1.5 percent and 0.6 percent, respectively.

    Although a weak peso has not translated into higher non-oil exports due to persistent structural constraints, terms of trade improvements have helped to further narrow the current account deficit.

    In the period 2017 to 2019, a recovery in economic growth is expected, driven by the recovery of non-oil exports and oil prices, and the 4G infrastructure program. Inflation is converging towards the target range.

    Growth is expected to strengthen over the 2018-2019 period, with economic growth driven by the recovery of non-oil exports and oil prices, and the 4G infrastructure program. Ongoing structural reforms are expected to enhance competitiveness and foster diversification, thereby supporting the growth recovery over the medium term. Inflation has decelerated and expectations are well-anchored.

    The continued compliance with the fiscal rule, instituted for the first time in 2012, shows that fiscal management remains strong. In 2016, the central government's structural fiscal deficit was 2.2 percent of GDP, while the actual fiscal deficit reached 4 percent of GDP. In this context, the implementation of the 2016 tax reform and cost containment measures are essential to continue fiscal consolidation and create space for post-conflict spending.

    Colombia's flexible exchange rate regime is one of the first lines of defense against external shocks. The Colombian peso depreciated about 80 percent between mid-July 2014 and February 2016, before appreciating in mid-March 2017. Despite the depreciation, non-oil exports grew more slowly than expected due to weak demand from major trading partners. The current account deficit adjusted more than expected to 4.3 percent of GDP in 2016, although oil exports continued to decline. Soft domestic demand and the dissipation of the effects of one-off factors that drove prices up in 2016 contributed to lower inflation below the upper limit of the range targeted by the Central Bank by mid-2017. This deceleration, together with a re-anchoring of expectations, allowed the Central Bank to reverse the monetary tightening implemented throughout most of 2016, lowering the policy rate by 25 basis points to 5.25 percent by early September 2017.

    Last updated: October 10, 2017

     

  • The Country Partnership Framework (Fiscal Year 2016-21) aims to support the government's development goals and guarantee the quality of the World Bank Group's (WBG) financial, knowledge and convening services to respond to the specific development needs of Colombia. The program supports the government under three strategic pillars:

    •Fostering Balanced Territorial Development;

    •Enhancing Social Inclusion and Mobility through Improved Service Delivery; and

    •Supporting Fiscal Sustainability and Productivity.

    Colombia is IBRD’s 7th largest Bank borrower with US$9.6 billion in outstanding debt. The active portfolio includes 10 IBRD credit operations and 2 Global Environment Facility (GEF) projects with net commitments of close to US $ 2.8 billion.

    Colombia also has a considerable Trust Fund portfolio with US$71 million represented in a variety of sectors.

    Last updated: October 10, 2017

     

  • In FY17, 2 Development Policy Financing operations for US$1.7 billion were approved.

    The Bank supports Colombian efforts to improve public sector management in municipalities to reduce poverty and inequity. It also supports urban public transport; the post-conflict and peacebuilding process (mostly through a multi-donor trust fund), as well as long-term natural disaster risk management and a disaster risk financing strategy, through the Treasury Bank

    In particular, the Bank is supporting Colombia’s efforts to improve public sector management in municipalities aimed at reducing poverty and inequity in the regions. It also supports urban public transport; the Post-Conflict and Peace Consolidation process (mostly through a Multi-Donor Trust Fund, of which the World Bank chairs the steering committee); as well as long term disaster risk management and a catastrophe risk financing strategy, through the Bank’s Treasury.

    The Bank is helping to strengthen the national protected areas in Colombia, through the coordination between government agencies and the local population.

    As of December 31, 2016, 2.550 farms from 12 departments/87 municipalities in Colombia have benefited to date from the sustainable cattle ranching project. The farmers have received technical assistance in environment friendly cattle systems. There are 60,677 hectares under environment friendly cattle systems as of now.

    Over the past 15 years, more than half a million higher education students in Colombia, especially those from vulnerable socio-economic backgrounds, have benefited from World Bank investment projects and have been able to access quality education through partnership with World Bank. The Higher Education Quality Access Program (ACCES - Acceso con Calidad a la Educación Superior) and the recently approved Access and Quality Program for Higher Education (PACES - Programa de Acceso y Calidad de la Educación Superior), which will benefit some 287,000 students, focused on supporting students from unfavorable socio-economic contexts As well as indigenous, Afro-Colombians, students from remote areas, and victims of armed conflict.

    Last updated: October 10, 2017

    To read about more World Bank results in Colombia, click here.

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Country Office Contacts

COLOMBIA: (57) 1 - 3263600
Cr 7 # 71 - 21, Torre A, piso 16
jbedoyavilla@worldbank.org
USA +1 202 473-1000
1818 H Street NW, Washington, DC 20433, USA
jbedoyavilla@worldbank.org