President Iván Duque Márquez, 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 1.4 million Venezuelans have arrived in Colombia as of September 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 percent in the first half of 2019, driven by robust private consumption and stronger investment. Growth is projected to accelerate to 3.3 percent in 2019, supported by stronger investment growth, accommodative monetary policy, and the dissipation of some transitory factors that affected growth in the first semester.
It is expected to accelerate further to 3.6 percent in 2020, as private consumption growth remains strong, and investment spending is boosted by lower effective corporate taxes and an expected recovery in residential investment and improved budget execution at the national level. Higher profitability in the oil sector is expected to incentivize investments in exploitation and exploration. A larger number of financial closings for the 4G projects and a pick-up in execution of existing projects augurs well for investment over the 2020-2021 period. Accommodative monetary policy and favorable financial conditions in the domestic market will also support growth.
Inflation has converged to the targeted range in early 2018 and is expected to remain within the central bank’s targeted range, aided by prudent monetary policy and anchored inflation expectations. Well-anchored price expectations and weaker economic activity, prompted the Central Bank to reverse its monetary policy tightening, cutting the policy rate gradually by a cumulative 350 basis points to 4.25 percent by early April 2018, maintaining a slightly accommodative monetary stance since then.
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.
The government has showed commitment to fiscal discipline, complying with the fiscal rule since its introduction. Starting with 2019 the Fiscal Rule Consultative Committee allowed an additional space of 0.5 percent of GDP, declining gradually, to accommodate migration-related spending, with a fiscal deficit allowed under the rule of 2.7 percent of GDP.
Additional fiscal consolidation measures may be needed to comply with the fiscal rule, as starting with 2020 lower corporate income tax and tax discounts for VAT paid on capital goods will weigh on tax revenues. Going forward the outlook depends on the country’s ability to address existing structural bottlenecks, sustain fiscal reforms, and diversify its economy to sustain higher productivity growth.
Last Updated: Oct 10, 2019