The Colombian government projects that the country’s economy will fall 5.5% this year as a result of the COVID-19 pandemic, technical finance minister Juan Pablo Zárate reported this Friday.
“As you know, starting in March of this year the scenario of COVID-19 is changing and dominating the world economy and Colombia has not been the exception in this matter. It has been a global negative shock and we have had the effects of that shock” Zárate said when presenting the 2020 medium-term fiscal framework.
According to the official, in February they calculated in the Government “that the growth of the Colombian economy could be 3.7%” this year, four tenths of a point more than the 3.3% in 2019, but after the pandemic “we have revised our growth forecast and the current forecast (…) is a drop in GDP growth of 5.5%. ”
“Thanks to the good fundamentals, a rapid recovery is expected, with a growth of 6.6% in 2021” of the Colombian economy, he added.
On the accounts for this year, the vice minister said that a fiscal deficit of 8.2% is expected, mainly due to the expenses that the Government has had in its effort to counteract the effects of the coronavirus crisis.
“The pandemic requires some efforts in health, to give aid to the most vulnerable population that cannot be in the labor market, there is the solidarity income program and also, of course, other types of aid to the productive sector, where it is very The formal employment support program is important, “he said.
For this reason, he stated that “the sum of all these expenses implies an additional expense to the one scheduled in February, of 2.7% of GDP”, and therefore the projection of a fiscal deficit equivalent to 8.2% of GDP.
Despite the fact that the coup by COVID-19 has not been as serious for the Colombian economy as the one received by other countries in the region, Zárate warned that once the effects of this crisis have passed, the fulfillment of the goals of the fiscal rule will require reform.
“The ideal time to analyze and discuss the tax reform that is required and to have specific decisions will be, once the pandemic has passed, it will be known what its final result will be and the economy will have sufficient growth to respond to the fiscal stimuli that are they will have to adopt, “he said.
OPINION ON IMF FORECAST
The International Monetary Fund (IMF) drastically lowered this year’s economic growth forecasts for several Latin American countries, such as Chile, to -7.5% this Friday; Colombia (-7.8%), Peru (-13.9%) and Venezuela (-20%) due to the coronavirus crisis.
In this regard, Zárate said that the projections of the IMF “differ a little from ours” and stressed that Chile and Colombia “are the Latin American countries that have the lowest drop.”
The new projections of the multilateral organization contrast with what was anticipated just three months ago and show a general decline in all the economies of the region.
For 2021, the IMF foresees a “smooth recovery” in GDP growth of 5% in Chile, 4% in Colombia, 6.5% in Peru and a less sharp contraction of -5% in Venezuela.