President Santos began his second term in office on August 7. Peace negotiations with guerrilla group FARC will remain a key topic in the political agenda. In May, 18 months after the beginning of negotiations, agreements have been reached on the third out of five topics (illegal drugs May 2014). Other two topics of agreement include rural development (agreement in June 2013), and political participation (agreement in December 2013). The two pending topics currently under discussion are the end of the armed conflict, and a strategy for the victims.
Under an effective countercyclical framework, Colombia’s growth was 4.7 percent in 2013 and is expected to reach 5 percent in 2014. Growth in 2013 was above the regional average (3.7 percent), although it was affected by lower international commodity prices, and disruptions in coal production. Economic activity accelerated towards the end of the year, driven by construction, agriculture and extractive activities. Strong economic activity, pushed by internal demand, help sustained high growth in the first quarter of 2014 (6.4% y/y), setting a positive tone for the year.
Unemployment reached a record low (9.6 percent in 2013), following important reforms to reduce non-wage labor costs.
Fiscal management continues to be among the strongest in the region. The government has complied with the fiscal rule that was first instituted in 2012. In 2012, the structural fiscal deficit was 2.4% of GDP, it narrowed to 2.3% of GDP in 2013, and this year, we expect the structural fiscal deficit to be on the order of 2.3% of GDP again, which would be sufficient to meet the 2014 target.
The public debt increased slightly in 2013 (from 34.5 % of GDP to 37.3%) following a higher balance in the bonds issued both internally and externally and the devaluation of the peso. Colombia continues to have ample access to both domestic and external financing. Regarding the government debt structure, there was increase in the average maturity of government debt which currently stands at more than 7 years compared to around 5 years in 2006, while the vast majority of government debt remains peso-denominated (76%) and fixed rate (94%).
Colombia: Commitments by Fiscal Year (in millions of dollars)*
*Amounts include IBRD and IDA commitments
The Country Partnership Strategy FISCAL YEAR 2012-16 aims at supporting the government’s development goals and guaranteeing the quality of the Bank’s financial, knowledge and convening services to respond to the specific needs of Colombia. It supports the government under three strategic themes:
Expanding Opportunities for Social Prosperity;
Sustainable Growth with Enhanced Climate Change Resilience; and
Inclusive Growth with Enhanced Productivity.
The progress report is being prepared.
Colombia is among the 10 top Bank borrowers in terms of IBRD exposure with $7.9 billion debt outstanding, representing close to 7 % of IBRD's total portfolio. Net commitments currently stand at $2.1 billion, $1.2 billion of which undisbursed.
The Bank is also helping to strengthen the national protected areas in Colombia, through the coordination between government agencies and the local population.
In addition, 2241 farms from 12 departments in Colombia have benefited to date fromthe sustainable cattle ranching project. The farmers have received technical assistance in environment friendly cattle systems. There are 24,890 hectares under environment friendly cattle systems as of now.
Through the Regional Peace and Development Program, social, economic and environmental assets were generated for 89, 367 people. More than 700 subprojects were implemented by social and community based organizations.
To read about more World Bank results in Colombia, click here.