November 2018 - A tax reform, again

Over the last eight years, Colombia has implemented five tax reforms and it is likely that in 2019 this number increases to six. This reform seeks to reduce the fiscal deficit to 2.4% of GDP and, at the same time, finance strategic social programs of the government. To achieve this, the reform proposes multiple measures, including an increase of 19% of VAT in products of the family basket and a tax refund mechanism for the poorest people. The measure will be debated in the congress and possibly modified. 

October 2018 - What explains economic recovery?

At the end of 2017, a slight recovery was expected for 2018. Today, GDP growth has been higher than expected and inflation is in the target range. Recent economic recovery is explained by household and government consumption and it is expected that investment and export will also recover. However, global economy present threats for colombian economy.

September 2018 - Contagion? Not yet

Global economy recovery has led to a major demand of oil. Simultaneously, it has also gave space for invreasing interest rates in developed economies, generation capital outflows from emergent markets to developed markets. This scenario has created risk in turkish and argentine economies. At this moment, it is not credible that the Colombian economy will be infected, however, factors such as the current account can be risky if the appropriate measures are not taken.

August 2018 - Labor market challenges for the upcoming years

Ivan Duque begins his presidential period with a stable economy. Even though the Colombian economy faced a major shock in oil prices, Macroeconomic authorities did manage to smooth the inflationary and contractionary effects this shock could have had over the economy. However, there are concerns about labour market behavior, despite its resilience to recent shocks. Unemployument rate in Colombia is high. For instance, the lowest unemployment rate has been 8.9% in 2014. Econometria Consultores estimated the structural unemployment rate and found it is about 10%. This implies that one of the major challenges for the new goverment is lowring unemployment rate without raisiing inflation and to foster formal employment.

July 2018 - A new normal in oil prices?

In recent years, the correlation between oil prices and the exchange rate has been strong and negative. Given that Colombia is an oil exporting country, its supply of foreign currency grows when the international price of the barrel increases. The fact that the correlation has increased during the last few years shows that the country has become more dependent on this commodity. This has generated a Dutch disease process, which implies difficulties for the country in terms of sound economic growth and in terms of the sustainability of public spending

June 2018 - First quarter: Good news

Market analyst and macroeconomic authorities were pleasantly surprised by the results of 2018 first quarter GDP estimates. While most of analysts expected a recovery, a GDP growth of 2.2% in the first quarter was in the upper bounds of their forecasts. Colombian faced difficult times after the oil prices drop in 2014-2015. The adjustment process has been organized by achieving price stability and reducing fiscal deficit. Monetary policy independency and fiscal discipline were the norm in later years. Those institutions among others had allowed Colombia to be part of OECD. It seems there are good news for Colombian economy.

May 2018 - What are the economic proposals of the Colombian presidential candidates?

There are two key economic topics discussed in these elections diversification of the economy and improving the quality of public spending. In the first place, the drop in oil prices showed the high dependency of the Colombian economy on this product and that the need to depend less on this commodity is evident. Most candidates agree on this point, however, there are differences among them in how to achieve such objective. Although there are differences among candidates in economic matters, the issue that is defining the electoral scenario is the implementation of the Peace Agreement that was signed with the FARC.

April 2018 - Balance in current account on the right track

Since 2014, Colombia suffered a major shock due to the fall in oil prices, which were reflected in a lower taxation, a reduction in exports and higher inflation. This forced a series of complex macroeconomic policies for the country. Punctually, contractive monetary policy, free floating of the exchange rate and a tax reform to increase government revenues. The current account deficit has been reduced within the last few quarters and is on a sustainable path in the long term, however, this reduction was not due to the effect of the devaluation in exports but to the recovery of the mining-energy sector. The foregoing reflects that the country lost competitiveness and has suffered a process of deindustrialization

March 2018 - Colombian economical perspectives for 2018 and 2019: Recovery

The global economy has shown signs of recovery. Economies like The United States, England and the Euro zone had greater economic growth than expected by the market in 2017. In one hand, we expect a higher demand that will boost growth. On the other hand, this global recovery also means risks on inflation because Latin American currencies are weakening. However, there is room for a more accommodative monetary policy that will incentive consumption and investment, given that the oil prices drop shock is now under control.

February 2018 - Actual data vs. Econometria forecasts for 2017

Econometría Consultores forecasts for 2017 were contrasted with official data for 2017. Regarding exchange rate, a revaluation of the Colombian peso was predicted, which actually happened. The discrepancies between the forecasted value and the observed value are due to the monetary decisions of the US federal reserve and the tax policies of the Trump government. In terms of the labor market, Econometría Consultores estimated an unemployment rate of 9.2%, while the unemployment rate published by DANE was 9.4%. This discrepancy is not statistically significant and may reflect the growing migration of Venezuelan citizens to Colombia, especially in Cúcuta. Finally, the inflation predicted by Econometría Consultores was 4.5% while the observed inflation was 4.32% and the discrepancy was due to an overestimation of food inflation.