IMF Executive Board Concludes 2019 Article IV Consultation with Colombia

May 1, 2019

On April 19, 2019, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Colombia.

Colombia’s economy is gaining momentum. Despite slowing global and regional growth, GDP growth strengthened in 2018 to 2.7 percent—underpinned by private consumption and a modest recovery in investment. Substantial migration inflows from Venezuela have added to domestic demand, especially for services. With demand-led growth, the current account deficit widened to 3.8 percent of GDP last year, as non-oil exports remained sluggish while imports surged. In terms of financing, the current account continues to be comfortably financed through foreign direct investment, as well as robust portfolio flows from a more diversified set of foreign investors. Inflation eased to near 3 percent at the start of 2018 and has remained stable thereafter. Inflation expectations also remain anchored near the central bank’s inflation target.

Following rate cuts in the first half of 2018, monetary policy has been moderately accommodative to support the economic recovery. Meanwhile, fiscal policy was broadly neutral, as the central government narrowed its headline deficit, mainly through expenditure cuts, to comply with the fiscal rule. A Financing Law should raise tax revenues in 2019 but may curb them in 2020 in response to a lower tax burden on corporates that nonetheless should stimulate business investment. Meanwhile, fiscal costs associated with migration flows from Venezuela are estimated to be around ½ percent of GDP this year, suggesting fiscal challenges are rising.

In terms of the outlook, Colombia’s economy should accelerate further this year and next. Staff expects growth around 3.6 percent in 2019 and 2020 in response to policy accommodation, migrants from Venezuela, investment-friendly tax reform, infrastructure spending and improving corporate balance sheets. Subdued corporate credit growth should pick up with the investment recovery and as loan quality improves. The structural reform agenda embodied in the National Development Plan aims to boost inclusive growth and enhance external competitiveness, while implementation of the peace agreement should further strengthen regional development. Heightened downside risks to the outlook stem primarily from the external side, including weaker global growth amid rising protectionism and a possible tightening of global financial conditions.

Executive Board Assessment [2]

Directors commended the authorities for their very strong policy framework and well executed policy actions, that have supported economic recovery and continued progress toward reducing poverty and inequality. While the outlook remains favorable, external imbalances have widened and the economy remains vulnerable to risks, including from lower global growth, tighter financial conditions, and ongoing migration pressures from Venezuela. Going forward, Directors encouraged continued efforts to appropriately calibrate the policy mix to support recovery, enhance resilience and build buffers, while implementing structural reforms necessary to boost inclusive growth and enhance external competitiveness. Directors commended the authorities for the substantial relief and support efforts for the large inflow of migrants from Venezuela.

Directors welcomed the authorities’ strong commitment to the fiscal rule, which has served the economy well. In the context of the large migration shock from Venezuela, they supported the use of flexibility within the rule to accommodate related spending, while preserving the integrity of the fiscal anchor and the medium term structural balance objective. Directors noted that the authorities’ commitment to fiscal sustainability should be supplemented by structural fiscal reforms to safeguard social spending and public investment. In order to boost revenue and enhance spending efficiency, they encouraged efforts to broaden the tax base, improve tax administration, eliminate preferential regimes for businesses, reform the energy subsidy and strengthen investment project selection and evaluation.

Directors welcomed the convergence of headline inflation to its target and the continued anchoring of inflation expectations. They noted that the current monetary policy stance is appropriate, but should be tightened if credit and economic activity recover as projected. Directors welcomed the central bank’s reserve accumulation program as a proactive step to maintain external buffers. They noted that the flexible exchange rate should continue to be the first line of defense against external shocks, with adequate international reserves and the Flexible Credit Line acting as additional buffers.

Against a backdrop of a sound banking system, Directors commended the authorities for continued advances in financial regulation and supervision, including the steps taken to align regulation with Basel III standards over time and through the implementation of the Conglomerates Law that should further strengthen the financial system.

Directors emphasized the need to continue with structural reform implementation. They noted that further efforts are needed to improve the business environment, reduce trade barriers, address skills mismatches, close infrastructure gaps, strengthen governance and the rule of law, and reduce corruption. A pension reform that improves coverage and progressivity should also remain a priority. Directors welcomed the National Development Plan’s focus on many of these issues and called for its steadfast implementation.

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 1/




Combined public sector 1/




Public debt 2/




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; nominal)




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

1/ Excludes projected privatization proceeds.

2/ 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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