1. NS4540 Winter Term 2018 Colombia’s Economy
Oxresearch, Colombia: Economic Recovery likely in 2018, November 2017

2. Overview I Colombia is Latin America’s fourth largest economy
Set to recover slightly in2018 after three years of slow growth
Factors contributing to the expansion include
Expanded budget
Ambitious infrastructure plans and
The advancement of the peace process
All are feeding into s sense of optimism for the future
However
Upcoming elections (May 2018)
Continued insecurity and
Corruption scandals
All have the potential to dampen optimism and with it the economy.

3. Overview II
GDP will grow faster than many other Latin American nations, making Colombia more attractive for foreign investors.
Economic diversification should help advance Colombia’s OECD membership association process
Colombia is unlikely to return to the growth rates of the era of thigh oil prices anytime soon.
Having enjoyed average annual growth rates of 4.3% between 2009 and 2014, Colombia’s economy suffered from the 2014 oil price plunge.

4. Recent Trends I
GDP growth slowed from 4.4% in 2014 to 3.1% in 2015 and 2.0% in 2016 with the IMF forecasting 1.7% for 2017
The downturn has been exacerbated by
High inflation
Tight monetary policy,
Government austerity
Declining investment,
Falling exports and
Deteriorating confidence

5. Recent Trends II Inflation was driven up by
Peso depreciation,
A drawn-out truckers’ strike and
El Nino – drought
A comeback is expected in 2018 due to
Higher oil prices and
A more favorable domestic environment
IMF forecasts 2018 growth of 2.8% -- much stronger than its regional Latin America/Caribbean forecast o 1.9%

6. Recent Trends III

7. Growth Potential I
End of commodities boon seen Colombia’s potential rate of growth fall from
4.0% to 5.0% to
2.8% to 4.1%
Future growth will depend largely how successfully Colombia reduces its dependence on oil and coal exports
IMF and OECD have called on Colombia to move towards a more diversified, inclusive economy with a stronger focus on improving education to attain these goals
Structural tax reform of December 2016 is expected to help generate more investment and jobs in non-oil sectors, helping to offset reduced oil investment

8. Growth Potential II Greater investment is likely given
An ambitious road infrastructure program and
The peace process with the FARC
This will help growth only in the long-term
The extent to which these factors will help depends upon how successfully they are implemented in the coming years
Peacebuilding programs will be a financial burden at least for the next few years
Should May 2018 elections bring someone to power who is against the peace process, investor confidence will suffer.
Corruption allocations – many related to construction contracts has given the future infrastructure plans an element of unpredictability

9. Financing The 2018 Budget prioritizes Education, Social inclusion and
Peace
Education will receive the largest share of the budget followed by defense
International Financing
Colombia has tapped international markets several times to take advantage of its good standing with global investors
Investors impress with the country’s prudent macroeconomic and fiscal policies
With falling budget deficits will probably not borrow internationally in 2018

10. Assessment In 2018 the economy should benefit from Higher oil prices
Increased infrastructure investment
Lower interest rates and
Falling inflation
The government will further reduce a fiscal deficit that increased in recent years due to falling oil revenues.