IMF Executive Board Concludes 2021 Article IV Consultation with Colombia
IMF News, March 23, 2021
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- Published: March 23, 2021
Overview
- The Executive Board of the International Monetary Fund concluded the Article IV consultation with Colombia on March 19, 2021.
- Colombia experienced a severe social and economic toll from COVID-19, including more than 60,000 deaths and GDP contracting by 6.8 percent in 2020.
- The authorities implemented a coordinated policy response using their strong policy framework, including a crisis mitigation fund, emergency measures supporting health care, households and businesses, a flexible exchange rate, monetary policy accommodation and liquidity support, temporary suspension of the fiscal rule, and macroprudential measures.
- A national vaccination program covering most of the population started in February.
Economic impact and recovery projections
- 2020 GDP contraction: -6.8 percent.
- Growth outlook: GDP is projected to rebound to around 5 percent in 2021 (staff projection: 5.1 percent).
- Timing of return to pre-pandemic levels: not projected until the second half of 2022.
- Labor market: Over 5 million jobs were temporarily affected; unemployment peaked and has partly rebounded though local lockdowns have recently dampened employment gains.
- Risks: Both external and domestic risks to growth remain tilted to the downside.
Executive Board assessment and policy guidance
- Directors recognized Colombia’s very strong policy frameworks and track record that enabled a timely policy response to the pandemic.
- Near-term policy stance: Emphasized the need for sustained policy support in the near term while safeguarding financial stability and medium-term fiscal sustainability.
- Fiscal policy:
- Noted temporary suspension of the fiscal rule to accommodate emergency spending for health care, households, and firms.
- Recommended that emergency measures be gradually removed as the pandemic subsides.
- Welcomed the planned fiscal reform anchored in durable revenue mobilization and improved tax administration.
- Stressed return to the fiscal rule to anchor medium-term adjustment and public debt sustainability, balancing flexibility and credibility.
- Encouraged considering enhancements to the fiscal framework and its implementation.
- Monetary and financial sector policy:
- Welcomed the central bank’s actions to provide liquidity and the balanced use of regulatory and supervisory flexibility to support credit.
- Noted that monetary policy can be eased further, if needed, but emphasized continued vigilance in financial supervision and use of macroprudential policies to safeguard financial stability.
- Welcomed the authorities’ commitment to maintain a flexible exchange rate.
- External financing and reserves:
- Noted Colombia’s first-ever purchase under the Flexible Credit Line (FCL) complemented public and external financing and helped maintain strong external buffers.
- Directors welcomed the authorities’ intention to treat remaining access under the FCL as precautionary.
- Recommended continued accumulation of reserves over time to preserve reserve coverage.
- Structural and social policies:
- Encouraged continued efforts to promote employment, inclusive growth, and external competitiveness by implementing the National Development Plan and Peace Accords.
- Commended efforts to integrate Venezuelan migrants into the economy (including granting Temporary Protective Status) and noted this should raise Colombia’s potential growth in the medium term.
- Acknowledged progress on governance and transparency and encouraged sustained efforts to strengthen the anti-corruption and AML/CFT frameworks.
External sector, financing, and vulnerabilities
- Current account deficit projection: projected to widen to 3¾ percent of GDP on account of higher growth and imports picking up.
- External financing needs: expected to remain elevated.
- Financing composition: As non-oil FDI recovers and public borrowing needs decline, the share of private capital flows in external financing is expected to increase.
- External debt and reserves (selected indicators from table):
- External debt (percent of GDP and related series shown across years in the source table).
- Gross international reserves series show levels and projections in billions of U.S. dollars as provided in the source table.
- Share of short-term debt at remaining maturity + CA deficit: series shown in source table (e.g., 113, 103, 100, 116, 124, 132, 111, 108, 104.5).
Key statistics (selected figures from the report)
- Population (million), 2019: 50.3
- Unemployment rate, 2019 (percent): 9.7
- Urban population (percent of total), 2019: 81.1
- Physicians (per 1,000 people), 2018: 2.2
- Per capita (US$), GDP, 2020: 5,393
- In billion of Col$, GDP, 2020: 1,002,587
- In billion of US$, GDP, 2020: 271
- Gini coefficient, 2019: 52.6
- Poverty rate, 2019: 35.7
- Life expectancy at birth (years), 2018: 77.1
- Mortality rate (under 5, per 1,000 live births), 2018: 14.2
- Selected macro projections and historical series (percent changes or levels as reported):
- Real GDP: 2016: 2.1; 2017: 1.4; 2018: 2.6; 2019: 3.3; 2020: -6.8; 2021: 5.1; 2022: 3.6; 2023: 4.0; 2024: 3.8
- Potential GDP: 2016: 3.0; 2017: 2.9; 2018: 3.1; 2019: -2.0; 2020: 2.7; 2021: 2.8; 2022: 3.2
- Output Gap series: 2016: 0.6; 2017: -0.8; 2018: -1.2; 2019: -1.0; 2020: -5.9; 2021: -3.7; 2022: -2.9; 2023: -1.9; 2024: -1.1; 2025: -0.4; 2026: 0.0
- Consumer prices (average): 2016: 7.5; 2017: 4.3; 2018: 2.5
- Consumer prices, end of period (eop): 2016: 5.7; 2017: 4.1; 2018: 1.6
- Exports (f.o.b.): series includes 2019: -4.7; 2020: -21.0; 2021: 24.9; 2022: 4.5; 2023: 3.7
- Imports (f.o.b.): series includes 2019: -18.5; 2020: 16.4; 2021: 4.2; 2022: 5.4; 2023: 5.0
- Broad money: 2019: -3.0; 2020: 11.1; 2021: 9.9
- Credit to the private sector: 2016: 7.7; 2017: 12.8; 2018: 6.8; 2019: 11.6; 2020: 9.4; 2021: 10.9; 2022: 11.3; 2023: 11.4
- Central government balance (percent of GDP): 2016: -4.0; 2017: -3.6; 2018: -4.8; 2019: -2.5; 2020: -7.7; 2021: -9.5; 2022: -4.4; 2023: -2.4
- Central government structural balance: 2016: -3.3; 2017: -2.6; 2018: -2.3; 2019: -2.2; 2020: -6.4; 2021: -8.0; 2022: -2.7
- Public sector gross debt (percent of GDP): 2016: 49.8; 2017: 49.4; 2018: 53.6; 2019: 52.3; 2020: 62.8; 2021: 64.2; 2022: 64.3; 2023: 63.5; 2024: 61.4; 2025: 59.3; 2026: 57.2
- Gross domestic investment (percent of GDP): 2016: 23.2; 2017: 21.6; 2018: 21.2; 2019: 21.5; 2020: 18.8; 2021: 19.2; 2022: 19.8; 2023: 20.5; 2024: 20.8
- Gross national savings (percent of GDP): 2016: 18.6; 2017: 18.2; 2018: 17.1; 2019: 15.5; 2020: 15.4; 2021: 16.0; 2022: 16.6; 2023: 16.9
- Current account (deficit - percent of GDP): 2016: -3.4; 2017: -4.1; 2018: -3.8; 2019: -3.9
- External debt (percent of GDP and percent of exports series provided in source table)
- External debt service (percent of exports of goods and services): series includes values such as 2016: 66.6; 2017: 72.0; 2018: 68.9; 2019: 75.1; 2020: 109.3; 2021: 88.4; 2022: 80.2
- Interest payments (percent of exports of goods and services): series includes values such as 2016: 10.7; 2017: 10.5; 2018: 14.9; 2019: 15.3; 2020: 14.8; 2021: 15.0
- Selected export figures (in billions of U.S. dollars) series: 2016: 34.1; 2017: 39.8; 2018: 44.4; 2019: 42.4; 2020: 33.5; 2021: 41.8; 2022: 43.7; 2023: 45.3; 2024: 46.9; 2025: 48.8; 2026: 50.8
- Of which: Petroleum products (series in billions of U.S. dollars): 2016: 10.8; 2017: 13.3; 2018: 8.8; 2019: 13.4; 2020: 12.9; 2021: 13.0
- Gross international reserves (series in billions of U.S. dollars): 2016: 46.2; 2017: 47.1; 2018: 47.9; 2019: 52.7; 2020: 58.5; 2021: 60.7; 2022: 61.6; 2023: 63.3; 2024: 65.5
Source: IMF Executive Board Concluding Statement of the 2021 Article IV Consultation with Colombia (March 23, 2021).
