Although the country will hardly return to the levels of economic growth achieved in 2021 and early 2022, when the rebound after the pandemic crisis brought GDP to levels never seen before, today the battle of the authorities is focused on facing the slowdown and guaranteeing at least that progress is made at a pace that allows the local market to maintain its attractiveness for investors.
This is why work is already underway on a reactivation plan, announced by the Presidency of the Republic itself and to which the various productive sectors were summoned, in order to have concrete actions in the coming weeks, while working on other fronts such as recovering investor confidence and ensuring fiscal stability in the medium and long term.
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There are different views on the speed at which the Colombian economy should grow. distant, since for some experts, annual variations of at least 3% must be achieved; while others maintain that the appropriate pace is the one that the economy can achieve in order not to generate overheating. All this without losing sight of the protection of the labor market and the attraction of new capital.
Stick in the wheel
The route and what must be done is clear and has been stated several times by the academy, unions and economic study centers. And although the Casa de Nariño and the Ministry of Finance have shown themselves in favor of ideas such as generating confidence, promoting investment and working hand in hand with the various unions, the accounts of the General Budget of the Nation could be a spanner in the works to achieve this.
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This is reflected in a recent report by the Corficolombiana research team, which looks at investment allocations and warns that the strong cuts will end up hitting the development engine and therefore, the bad streak will be favored. which has been showing the GDP, precisely due to lack of money to execute projects.
“We found that 125 of the 183 entities with investment budgets in 2025 would suffer cuts for an aggregate amount of $24 billion, where the Administrative Department for Social Prosperity (DPS), the National Land Agency (ANT) and the National Housing Fund (Fonvivienda), account for 42% of the total cut,” they said in the report.
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It is worth highlighting that much of the slow economic recovery The situation in the country, taking Dane figures as a reference, is explained by the falls and unfavorable reports shown by sectors such as construction, industry and commerce, which mostly depend on works that can arise from the resources that are being cut.
“The changes in the 2025 budget allocations are not related to their efficiency in execution so far in 2024, and the reduction in the investment budget in entities such as Invías, Fonvivienda and ANT with great potential for linkages and to boost reactivation is a cause for concern,” they warned.
Financing risks
In addition to what has been reported about what will happen with the investment and adding to the various calls that have already been made regarding the sources of financing proposed by the Ministry of Finance, Corfi experts pointed out that It is possible that the country will not collect all the money that is claimed and fiscal stability will be put at risk.
Colombian pesos.
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“In terms of financing, the Ministry of Finance projects tax revenues of $304.5 billion next year and an additional $12 billion if the Financing Law that is about to be submitted to Congress is approved. Even without taking the latter into account, the goal for next year implies a growth in tax revenues of 17.8% compared to the 2024 goal of the Medium-Term Fiscal Framework,” they said.
This is why they ask to keep in mind that “the trend in collection this year points in the opposite direction and that the value collected in the first seven months of 2024 had an annual drop of 6.8%, which implies that to meet the MFMP’s tax revenue goal it should grow, on average, above 4% annually between August and December.
In conclusion and as a warning, they stressed that “it is unlikely that the government will achieve the income target for next year and we anticipate that, in the absence of adjustments to the draft PGN, the country will have difficulties in complying with the fiscal rule next year.”
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Turbid waters
Finally, according to former Finance Minister Juan Camilo Restrepo, the fiscal crisis facing Colombia is more serious than has been publicly acknowledged and beyond being honest about the accounts, it is necessary for the Government understand the economic situation and implement the spending proposals for the 2025 PGN.
“In addition to the $12 trillion deficit for the 2025 budget, the Autonomous Committee on Fiscal Rules (CARF) has identified an additional shortfall of $21 trillion. These figures, together with other hidden deficits that will begin to emerge, reveal a much more worrying fiscal outlook,” said this expert.
For Restrepo Salazar, there are two examples that illustrate the magnitude of the problem, Starting with the Comptroller’s warning about the possible impacts on services for 10 million energy users, due to the lack of subsidies that the distribution companies should receive.
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He also said that “it cannot be overlooked that Grupo Energía Bogotá is facing difficulties in guaranteeing the supply of electricity to new companies in the west of the city, which suggests a hidden energy rationing.”
With all this on the table, Juan Camilo Restrepo indicated that Congress must be extremely cautious when studying the 2025 budget, avoiding making mistakes similar to those of last year, when in his opinion revenues were overestimated that did not materialize, which forced $20 billion to be cut from the budget in full execution. He also explained that the new tax reform, If not handled carefully, it may not be enough to correct the fiscal mess.
