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Overview

Colombia’s presidential elections in June 2022 resulted in a victory for Gustavo Petro of the leftist coalition Pacto Histórico. More than 22 million Colombians cast their votes, meaning a turnout of 58 %, the highest since 1998. Petro (Pacto Histórico) obtained 11,280,200 votes (50.4 %) and Rodolfo Hernandez (Liga de Gobernantes Anti-Corrupción) 10,579, 106 votes (47.3 %). The Petro administration's main priorities are consolidating peace, social justice, environmental justice, and change for women.

Colombia has a track record of prudent macroeconomic and fiscal management, anchored on an inflation targeting regime, a flexible exchange rate, and a rule-based fiscal framework, which enabled the economy to grow uninterrupted since 2000 and provided policy space to respond to the COVID-19 crisis.

Colombia’s economy has recovered vibrantly from the COVID-19 crisis supported by a bout of consumption that had been repressed during the pandemic. GDP rebounded 10.7 percent in 2021 and it is projected to grow 7.1 percent in 2022. This exceptional dynamic has brought the economy to operate above its potential and, growth is projected to slow gradually to 2.8 percent by 2025.

Strong domestic demand, the depreciation of the Colombian peso, indexation of wages and regulated prices, and price pressures from abroad have pushed inflation to over 10 percent. In response, the Central Bank increased the monetary policy rate to 10 percent at end-September.

With some 1.4 million people exiting poverty in 2021, the national poverty rate has dropped to 39.3 percent, still above pre-pandemic levels. The middle class has also rebounded, and income inequality has declined. Nonetheless, 2.1 million of those who had fallen into poverty in 2020 are estimated to have remained poor in 2021. Moreover, the decline in poverty has been uneven and has not benefited afro-Colombians and indigenous people. Living conditions of Venezuelan migrants and victims of conflict have improved, but from a dire pre-pandemic poverty situation. Although poverty is projected to decline in 2022, inflation (particularly food inflation) is estimated to slow down poverty reduction, mostly affecting those in rural areas and the extreme poor.

Colombia continues to face important structural challenges. First, the rate of potential growth is insufficient to secure a convergence in income per capita to high-income countries. Second, Colombia remains one of the most unequal countries in the world. While the 2021 economic rebound and the continuation of emergency transfers have helped reduce poverty, high inflation is undermining progress, and the recovery is not reaching all groups. Abating poverty durably and increasing resilience among the non-poor will require expanding the coverage of the social security system, reducing rigidities in automatic inclusion to social programs, making labor markets more efficient and inclusive, and improving the level and quality of education, health, and infrastructure. Third, the current account deficit (although declining) remains high, and a sustainable reduction of the fiscal deficit and of the general government’s debt-to-GDP ratio would require a durable increase in taxes and reduction in fuel subsidies. Finally, Colombia needs to start preparing itself for climate change, introducing not only adaptation and mitigation measures but also deep structural reforms aimed at facilitating the adoption of technology, innovation, and diversification of its export away from non-renewable resources.

The tax reform submitted to Congress in August 2022 attempts to increase tax collection (including from new taxes) and progressivity of the personal income tax. Higher revenues would allow strengthening the social protection system and secure a reduction of the fiscal deficit. 

Last Updated: Oct 06, 2022

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households are reached by small farmers alliances in Colombia, supported by the World Bank

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COLOMBIA: (57) 1 - 3263600
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