The National Government presented in recent days its fiscal outlook for 2022, within which, finance ministerJosé Manuel Restrepo, highlighted a encouraging outlookespecially in relation to the gross debt forecast for this year, which would be 62.7%.
(Read: Fall in the country’s fiscal deficit would depend on expenses in recovery).
This implies, that in 2022, the projection not only improved by 5.9 percentage points compared to what was defined in the Medium Term Fiscal Framework (MFMP) of last year (68.6%), but it is also below the target set for 2032 (62.8%). However, for some experts, this goal could have several challenges that could dilute that optimism.
The Minister assured that, originally, in the MFMP of June 2021, it was expected that from 2024 the level of debt would be reduced to stabilize it at 62.8% by 2032, but the change in perspectives was due to that since last year was achieved “that this gradual and orderly adjustment of public finances is being achieved more quickly”, this as a result of the higher growth in 2021 and that expected in 2022, and also the better collection.
According to Wilson Tovar, manager of economic research at Acciones y Valores, the year started off on the right foot, and GDP growth of over 10% is expected in 2021, but the 5% forecast for 2022 “is more challenging.” According to Tovar, “there are countless variables that can make it difficult to achieve the growth number, and that determines the level of debt. What is happening is that the base with which that debt is being measured is a very high GDP, and we are already seeing downward revisions, both by the IMF and the Banco de la República itself”, he stressed.
(Read: When does a debt prescribe and how recommended is it for this to happen?).
Among the elements that Tovar assures that will present more challenges for growth, and therefore for the level of debt, is the fact that consumer confidence fell in January and that we also have inflation in which some items such as potatoes, meat are rising more than the minimum, which, according to the expert, already generates a loss of purchasing power. Added to this, he adds, is the electoral landscape, and that “Surely in the middle of the year the interest rates of the Banco de la República will be around 5.5% or 6%”.
For this reason, he maintains that the advance of 10 years could become not so aggressive.
Other analysts have a more optimistic stance, but without ruling out the risks. José Ignacio López, director of economic research at Corficolombiana, He assured that the government’s goal of 62.7% would be a drop of 2 percentage points compared to the maximum that we had reached in 2020 due to the pandemic.
“It is feasible, because this year we are going to continue with a significant growth inertia,” assured López. The economist highlighted how the collection of January was a good thermometer that the economy started well, but he recognized that “There is uncertainty about the electoral issue, inflation and its effect on consumption. They are important components of uncertainty about how much the economy is going to grow, but it seems to us that the Ministry’s projections are relatively good and this could be an achievable goal that anticipates a debt reduction planned for 2032”.
(Read: External debt grows 13.2% in the last year).
For other experts, on the contrary, “The updated figures of the financial plan look favorable”, As Camilo Pérez, director of economic research at Banco de Bogotá, put it, and according to the economist, the improvement in the debt figure is largely derived from the good growth results for both 2021 and 2022.
“That a goal that was set for a 10-year horizon is fulfilled in advance has to do with two things: when the previous figure was obtained, we were perhaps in one of the worst fiscal moments that Colombia has had on record, where at the time a very low growth of the economy was forecast for 2021, around 5%. It was a different situation,” he assured.
LAURA LUCIA BECERRA ELEJALDE
BRIEFCASE
