IMF Executive Board Concludes 2018 Article IV Consultation with Colombia

April 30, 2018

On April 27, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Colombia.

In 2017, adequate policy management brought Colombia near completion of its adjustment to large external shocks while further advancing inclusive growth. Economic growth moderated as private investment and consumption weakened in line with lower national income. Some delays in the infrastructure agenda also contributed to the decline in private investment.

Fiscal consolidation continued guided by the fiscal rule and contributed to the narrowing of the current account deficit which was also buttressed by some recovery in oil and non-oil exports. The proceeds of the structural tax reform helped protect public investment and social expenditure. As past shocks dissipated, inflation rapidly declined toward the target and the central bank’s easing cycle supported the recovery observed in the second part of the year while protecting the anchoring of inflation expectations. Despite the growth moderation, social indicators improved with both poverty and income inequality decreasing in 2017.

The current account deficit declined to 3.4 percent of GDP and continued to be financed by FDI to a large extent. Portfolio inflows moderated somewhat but remained ample with further increases in foreign participation in the local government debt market. The banking system has weathered the economic slowdown well and the planned implementation of the conglomerates law this year will improved the regulatory and supervisory framework including the management of corporate and overseas risks.

Colombia’s outlook is favorable as continued efforts to advance the structural reforms will foster economic diversification and productivity growth. Economic growth is expected to rebound strongly in 2018 and further over the medium-term, led by strengthening investment and exports. The combined impact of the structural tax reform, a brighter outlook for oil prices and the authorities 4G infrastructure agenda will underpin investment while reducing Colombia’s relatively large infrastructure gap.

Continued efforts to reduce trade barriers and some recovery in global growth will help sustain strong export growth. The implementation of the peace agreement will promote regional development and reduce inequality. Risks to this outlook remain to the downside and stem in part from still sizeable external financing needs. Colombia remains exposed to a sharp tightening of global financial conditions.

Executive Board Assessment [2]

Executive Directors commended the authorities for their strong macroeconomic management and improvements to the policy framework, which have secured the needed adjustment, strengthened recovery, and reduced poverty and income inequality. While the outlook is positive, the economy remains vulnerable to uncertainties from a sudden tightening of global financial conditions and escalation of trade or geopolitical tensions. Directors welcomed the authorities’ commitment to maintain very strong policies and ambitious structural reforms to address remaining vulnerabilities, ensure macroeconomic stability, and foster sustainable and inclusive growth.

Directors highlighted that structural reforms should focus on raising productivity and potential growth. They noted that implementation of the Fourth Generation infrastructure projects and the peace agreement offer an opportunity to advance priorities, including, improving the business environment, tackling labor market informality, providing high quality education, and promoting infrastructure investment. Lowering barriers to international trade would also be important.

Directors concurred that placing public debt on a declining path is an appropriate fiscal target which would also leave room to fine tune the consolidation pace as guided by the fiscal rule. They welcomed the achievement of the 2017 deficit target despite the weaker than expected growth outturn. Directors encouraged the authorities to focus on improving tax administration, as associated revenue gains will create space for public investment. They highlighted the need for a comprehensive pension reform to increase coverage and progressivity.

Directors welcomed improvements in the monetary policy framework which will help further refine the central bank’s decision making process and, combined with clear communications, will preserve the anchoring of inflation expectations. They noted that the current monetary policy stance should be conducive to a recovery in activity and that reducing the rate further in line with inflation expectations could be warranted if the recovery faltered. Directors agreed that the flexible exchange rate regime has served Colombia well and should remain the first line of defense against global shocks as well as help accumulate adequate buffers.

Directors noted that the banking system has been resilient amid the economic slowdown, reflecting partly effective financial supervision and ample capital and liquidity. They welcomed recent regulatory measures to homogenize banks’ loan restructuring practices and to bring regulation closer to Basel III standards, including through the implementation of the conglomerates law.

Colombia: Selected Economic Indicators





(Annual percentage changes, unless otherwise indicated)

National Income and Prices

Real GDP




Consumer price index (period average)




Consumer price index (end of period)




GDP deflator




Terms of trade (deterioration -)




Real effective exchange rate (depreciation -)




(In percent of GDP, unless otherwise indicated)

Public finances

Central government balance




Combined public sector




Public debt 1/




External Sector

Current account (deficit -)




External debt




Of which: Public sector




GIR in percent of short-term debt




Savings and Investment

Gross domestic investment




Gross national saving




(12-month percentage changes, unless otherwise indicated)

Money and credit

Broad money (M2)




Credit to the private sector




Interest rate (90-day time deposits; percent per year)




Sources: Colombian authorities; and Fund staff estimates and projections.

1/ Includes Ecopetrol and Banco de la Republica's outstanding external debt.

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: .

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