107
Colombia Economic growth is projected to remain robust in the coming two years, despite external headwinds. Investment will be a key driver of growth, aided by tax reforms and ambitious infrastructure projects. Low interest rates will support consumption, while unemployment will start falling. High inequality and informality will remain major policy challenges. The mildly accommodative monetary policy stance is appropriate, with inflation expectations close to target and still high unemployment. Fiscal policy will need to consolidate to reduce the deficit gradually in line with the fiscal rule. Boosting productivity requires stronger competition and increased openness to trade. A better targeting of social policies and reforms to boost job quality and reduce informality would allow for more widespread sharing of the benefits of growth. Consumption and investment are driving growth Economic growth has risen, fostered by strong domestic demand driven by improving credit markets and a positive response from companies to the tax incentives granted in a recent tax reform. The current account deficit has widened, as imports are rising while export performance remains weak. Unemployment has increased despite stronger growth, as employment creation remains too feeble to accommodate the labour force increase due to immigration. Inflation has increased in 2019, driven mainly by increases in food prices and a moderate effect of the peso depreciation, but it remains within the target range.
Colombia Robust investment is driving growth
Inflation remains contained
Contributions to real GDP growth % Pts 10
Y-o-y % changes 9
Real GDP growth
8
Headline inflation
Private consumption
Core inflation¹
8
Government consumption
Inflation expectations²
7
Investment
6
6
Net exports
5
4
4 2
3 Inflation target range
2
0 -2
1 2010
2012
2014
2016
2018
2020
0
0
2015
2016
2017
2018
2019
0
1. Core inflation excludes primary food, utilities and fuel. 2. Inflation expectations are defined as the 12-month ahead inflation expectations. Source: Banco de la República; and OECD Economic Outlook 106 database. StatLink 2 https://doi.org/10.1787/888934045202
OECD ECONOMIC OUTLOOK, VOLUME 2019 ISSUE 2: PRELIMINARY VERSION © OECD 2019