Government raises its bets for Colombian GDP in 2021 to 8.5%

Although the Treasury had remained cautious about its GDP target for 2021, the good indicators in various sectors, as well as the optimism of the market, international entities and the same Bank of the Republic, led the Ministry of Finance to finally raise the figure.

(See: Annual inflation as of October in the country was 4.58%).

“We are already certain that Colombia will grow in 2021 above 8.5%. This is good news because it means that the reactivation process is underway, but it is also leaving results from the economic and fiscal perspective as well. It means, surely also, that the fiscal deficit of our country will be below 8.6% as originally estimated for this year“, said the Minister of Finance, José Manuel Restrepo.

The Minister stressed that “the reactivation process is derived from several things“In the first place, he highlighted the increase in domestic demand, which is manifested in a very good behavior in consumption. The head of the Treasury portfolio also highlighted the behavior of exports, and how non-mining energy exports are showing the best figures in more than a decade.

“We are also seeing that the fiscal policy is giving results, that effort of spending and public investment has an impact,” said Restrepo, who also highlighted an increase in the interest of foreign investment.

(15 out of 100 people live on $ 4,833 a day).

Although the outlook looks positive, the head of the Treasury portfolio recalled the importance of continue attentive to the development of the pandemic and the dynamics of the different sectors of the economy. “The expectations of the bulk of the productive sectors are showing incredible results. In industry and commerce, for example, the best results in 41 years are being achieved“, said.

(See: The risks that the Colombian economy may face in the future).

Regarding employment, the minister also highlighted how there has been an important recovery and pointed out that Although 5.9 million jobs had been lost in April 2020, 5.2 million have already been recovered. “That means 88% has been recovered“, said.

EXPERTS SPEAK

Although the market had been showing optimistic figures for several weeks, lto Review by the Treasury confirms expectations.

“The data is definitely showing us that the economy is going much faster than we anticipate. More growth generates more collection, which is why the minister also spoke of a deficit lower than that of the Medium-Term Fiscal Framework. They are positive situations in terms that all that fiscal vulnerability that is talked about in foreign investments can generate greater confidence”, Indicated Sergio Olarte, Principal Economist at Scotiabank Colpatria.

(See: The majority in the Banrep believe that it is necessary to accelerate the increase in rates).

However, for Olarte, a growth of 8.5%, “which must be even higher, it is also accompanied by a much larger account deficit that must be financed, so it is key that foreign direct investment is also reactivated”.

Secondly, Juan Camilo Pardo, economic research analyst at Corficolombiana, highlighted that “The Government has raised the economic growth projection for this year to 8.5% confirms the position that we will return to the pre-pandemic levels of economic activity. This implies that we will close the output gap – potential capacity with respect to observed productive activity – faster than anticipated, which naturally imposes inflationary pressures”.

(See: Agro and non-mining, with 11% more participation in exports).

Pardo also indicated that the fiscal deficit will be lower in line with higher collection, but said that it is important to consider that “Much of this rebound is explained by higher levels of consumption, which is reflected in the leading indicators of confidence, spending and excess savings”.

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