Country Forecast Colombia November 2017 Updater

Country Forecast Colombia November 2017 Updater

  • November 2017 •
  • Report ID: 358889 •
  • Format: PDF


  • The president, Juan Manuel Santos of the centre-right Partido Social de Unidad Nacional, and his successor, who will take office in August 2018, will focus on implementing a peace agreement with the leftist FARC rebels. With oil prices relatively low, a priority will be to bolster the public finances, notably via fiscal reforms that have taken effect this year. However, fiscal constraints will continue to complicate efforts to boost growth and improve public services.
  • Political tension related to the peace accord will persist, but The Economist Intelligence Unit expects implementation of the deal to advance, albeit with delays. The process could slow after the presidential election in 2018, which we assume will be won by the former vice-president, Germán Vargas Lleras, a more right-leaning candidate than Mr Santos. A ceasefire was reached in September with the Ejército de Liberación Nacional, but further talks will progress slowly. The peace accords will bolster long-term economic, institutional and social development, but violence and crime will remain significant social problems.
  • After reaching an estimated 3.7% of GDP in 2017-reflecting reduced income from oil and slow GDP growth-the central government fiscal deficit will narrow gradually, to 2% of GDP in 2022. We expect the public debt burden to rise slightly before easing later in the forecast period and to be manageable as fiscal reforms and higher oil prices gradually put the public finances on a sounder footing.
  • GDP will grow tepidly in 2018, by 2.5%, reflecting fading fiscal constraints and an improvement in consumer confidence. It will firm up thereafter as government consumption and investment, as well as private consumption, pick up, aided by lower inflation and interest rates. However, at an average of 3.3% per year in 2019-22, growth will be lower than in the boom years of the commodities supercycle. The current-account deficit will narrow to a still-significant 3% of GDP in 2022. The deficit will be covered by capital inflows, but the external sector will remain vulnerable to shifts in commodities prices and investor sentiment towards emerging markets.
  • Free-trade agreements with the US, the EU and some Asian countries, as well as some progress in regional integration, will support trade flows and attract foreign investment. This, along with a large and increasingly middle-class population, will sustain reasonable GDP growth in the long term.
  • Market opportunities will broadly expand during the forecast period, underpinned by a sizeable and growing population, rising per-head income, increased consumer access to credit, improvements in the business climate and infrastructure, and trade integration (regionally and globally).


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