The Colombian economy, which stabilized and achieved pre-pandemic growth levels in the third quarter of this year, It will expand by 5.5% in 2022 and reduce that rate to 3.1% in 2023, according to the projections of the Organization for Economic Cooperation and Development (OECD).
(Colombia would be the second fastest growing economy in the region).
This is the best economic result forecast by the OECD for Latin America next year, ahead of Brazil, whose economy will decline in 2022, and the growth projected for Mexico, Argentina, Chile and Costa Rica.
This growth and the country’s economic recovery, which went into recession in the pandemic for the first time in two decades, It is motivated by private consumption, as extracted from the 2021 Economic Projections Report published this Wednesday by the OECD.
Since Colombia surpassed its deadliest peak of covid-19 in July of this year, and coinciding with the end of the massive protests in May and June, “consumer confidence has visibly increased in the second half of the year,” highlights the Ocde in the report.
INFLATION, EMPLOYMENT AND POVERTY
In the third quarter of 2021, the economy grew 5.7% compared to the previous quarter and 95% of the jobs destroyed during the pandemic have recovered, and wages in sectors such as retail sales or manufacturing are higher than before the pandemic, according to the international body.
(Colombian economy, the one that would grow the fastest in the next 2 years).
Employment, however, is recovering at a slower pace than economic growth, and pre-pandemic employment and occupancy rates will only be achieved in mid-2023. Inflation, which so far this year stands at 4.58%, will remain above 3% in 2022 and will begin to be reduced in 2023.
“Despite this context (of economic growth), consumer price inflation has increased and exceeds the tolerance threshold by around 3% of the inflation target”, the OECD alerted.
Monetary policy “It has reacted to the increase in inflation with the withdrawal of significant stimuli”, says the OECD, which forecasts that exchange rates will rise to 4% in 2023, although the projections are subject to “substantial uncertainty.”
In addition, the OECD recalls that the next Colombian government that takes office in 2022 will have to implement new fiscal changes to improve these purchasing power problems.
In fact, to close the gap created by the pandemic in poverty in the country, inequality and the informal labor market, it is necessary “more (public) spending on social protection, health and education”, which gives the “opportunity” to reform the tax system – again – to improve it, said the OECD.
(The Colombian economy would close 2021 above 8.5%, according to Asobancaria).
The agency also proposes a “significant revision” of the pension system that expands coverage and reduces poverty in the elderly.
“The current strong recovery trend is projected to slow in 2022 and 2023,” advanced the OECD, which considers that in the next two years private consumption and investment will continue to be the main engines of growth, boosted by fiscal support.
However, tax conditions may be less favorable in the years to come, According to the OECD, which also warned that Colombia’s vaccination rate is lower than that of other countries in the region, which may influence the economy.
Exports and imports will be those that contribute the most to the Gross Domestic Product (GDP) in 2022, with 10.9% and 10.6%, respectively, followed by total national demand (6.6%), government consumption (6.2% ) and private (5.6%). In 2023, exports and imports are expected to continue driving the economy, but at a slower pace (6.9% and 6%, respectively), but gross fixed capital formation will increase to 6.5% and government spending will decrease ( -1.4%).