President Ivan Duque Marquez began his presidential term on August 7th, 2018, and it will end on August 7, 2022. Duque, from the Democratic Center party, won the elections by achieving 53.95% of the votes (10,351,304 votes) while his rival Gustavo Petro reached 41.83% (8,024,697 votes). The main pillars of its government are legality, entrepreneurship, and equity, with transversal axes in terms of infrastructure, environmental sustainability and innovation.
Colombia has received a massive and accelerating inflow of migrants from Venezuela. Approximately 1.8 million Venezuelans have arrived in Colombia as of December 2019, according to Colombian official statistics. Colombia has taken a leading role in adopting an open borders policy and implementing good practices in the provision of services to Venezuelan migrants and returned Colombians in areas such as education to health, services of employment and humanitarian aid.
Colombia has a track record of prudent macroeconomic and fiscal management, and despite economic downturns has maintained its investment grade rating since 2013. After slowing down to 1.4 percent in 2017, economic growth accelerated to 3.3 percent in 2019, driven by robust private consumption and stronger investment. Growth was on track to accelerate further in 2020, but the COVID-19 pandemic is expected to significantly affect private consumption and investment.
In response to the crisis, the Government has implemented early emergency response measures – declared a State of Emergency, closed the country’s borders, and imposed a mandatory quarantine. The Government also announced a sizable fiscal stimulus package (COP 14.8 trillion or 1.4% of GDP, with potential to increase to up to 48 trillion) that would provide additional resources for the health system, special lines of credit for businesses in certain sectors, and increased transfers for vulnerable groups. Other measures include delayed tax collection in select sectors and lower tariffs for strategic health imports. The central bank reduced its intervention rate by 50 basis points on March 27 and introduced a broad range of measures to increase liquidity. The relief package to date is expected to be financed broadly by savings from the Savings and Stabilization Fund and the subnational pension savings fund.
Increased government spending is expected to mitigate, in part, the impact of the crisis in 2020, including the fallout on businesses and workers. External debt pressures in the short term are expected to be limited, given that resources for the stimulus package are expected to come from existing saving funds. The government is expected to continue to comply with the fiscal rule, which allows flexibility given the oil price and business cycle downturn.
Strong rebound in growth is expected for 2021-2022, provided that the pandemic is short-lived. The low interest rate environment, facilitated by the central bank, is expected to boost private consumption growth once domestic containment measures have been eased, and facilitate a gradual rebound in investment as major infrastructure projects such as the 4G road and the Bogota metro projects resume fully.
Inflation is expected to remain within the central bank’s targeted range, as exchange rate pass through pressures are tempered by weak demand. The lower oil prices and reductions in global demand are, however, expected to cause the CAD to deteriorate to 5.3 percent of GDP in 2020 before recovering to 4.7 percent in 2021-2022.
Colombia continues to maintain a solid macroeconomic framework. Key components of Colombia’s macroeconomic framework include the adoption of a full-fledged inflation-targeting regime, a flexible exchange rate, a Fiscal Rule (2011) for the central government, and a Medium-Term Fiscal Framework. The solid macroeconomic framework also helps build buffers and strengthen resilience to external shocks, facilitating external and domestic economic adjustment to potential shocks. Going forward the outlook depends on the duration and severity of the crisis and the country’s ability to rebound quickly, while addressing existing structural bottlenecks.
Last Updated: Apr 12, 2020