GDP growth is projected to slow sharply from 8.1% in 2022 to 1.2% in 2023, and then edge up to 1.7% in 2024. Consumption and investment will remain subdued as households and firms cope with high inflation and interest rates and uncertainty about the economic outlook and economic policy. Inflation is set to exceed 10% this year but is projected to gradually return to the 2-4% target range by 2024.
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Colombia’s economy has recovered remarkably well from the COVID-19 crisis, and strong ﬁscal and monetary policy support have averted a stronger contraction of incomes. Solid macroeconomic policy frameworks are laying the grounds for a continuous recovery of domestic demand, although the sustainability of ﬁscal accounts will require further action. In a longer view, however, both growth and social inclusion are trapped by weak structural policy settings that preclude more than half of income earners from formal jobs and social protection, while preventing ﬁrms from growing and becoming more productive. Solving this vicious circle through ambitious reforms would allow a signiﬁcant leap forward for material well-being in Colombia.
The pandemic is likely to lead to higher informality, inequality and poverty - reversing years of improvement. Low-quality basic and professional education often disconnected from labour market needs, large connectivity gaps and high regional inequalities need to be addressed in order to tackle informality and boost growth and employment in the medium-term.
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