President Santos began his second term in office on August 7, 2014. Almost three years after the beginning of the peace negotiations, agreements have been reached on four out of five topics illegal drugs (May 2014), rural development (June 2013), political participation (December 2013) and transitional justice – restorative and reparative (September 2015). The last pending topic is the end of the conflict, which includes the disarmament and the demobilization of the guerilla fighters. During the signing of the justice agreement, on September 23, 2015, the creation of a Special Jurisdiction for Peace was announced.
On March 30, 2016, the Government of Colombia announced the start of peace talks with the National Liberation Army (ELN). The talks in the public phase will take place mainly in Ecuador. The government and the ELN said they will discuss a six-point agenda: participation of society in building peace; democracy for peace; transformation for peace; victims; end of the armed conflict; and implementation.
In 2015, Colombia remained among the fastest growing countries in the region thanks to effective macroeconomic and fiscal management. Nevertheless, the country was significantly affected by the global economic slowdown and lower oil prices, and economic growth slowed from 4.6 percent in 2014 to 3.1 percent in 2015. The slowdown was mainly due to the extractives sector, while services remained the main engine of growth, and agriculture and manufacturing began to recover towards the end of the year. On the demand side, household consumption continued to drive economic activity, while government consumption and investment slowed and exports fell significantly.
The adverse external environment is expected to further impact the Colombian economy in 2016. Growth is expected to moderate further to 2.7 percent, before beginning to recover in 2017.
Unemployment reached a record low in 2015 (8.9 percent), following important reforms to reduce non-wage labor costs and despite the slowdown in economic activity. Fiscal management continues to be strong, as shown by the continued compliance with the fiscal rule that was first instituted in 2012. In 2015, the structural fiscal deficit of the Central Government was 2.2 percent of GDP; accounting for the economic and oil price cycle, the actual deficit reached 3 percent of GDP.
Colombia’s flexible exchange regime is the first line of defense to the external shocks. The unfavorable external environment has contributed to a strong depreciation of the peso. The US dollar reached COP 3,052 in March 2016, up from an average of COP 2,000 in 2014. This large depreciation, coupled with the effects of the El Niño phenomenon on food prices, has pushed price increases above the upper limit of the targeted band (2-4 percent), to 7.6 percent in February 2016. The interest rate hikes that the Central Bank has implemented since September 2015 are expected to help to gradually bring inflation back towards the target range by 2017.