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IMF Country Report No. 17/138
COLOMBIA
2017 ARTICLE IV CONSULTATION—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR COLOMBIA
May 2017
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2017 Article IV consultation with Colombia, the following documents have been released and are included in this package:
A Press Release summarizing the views of the Executive Board as expressed during its May 1, 2017 consideration of the staff report that concluded the Article IV consultation with Colombia.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on May 1, 2017, following discussions that ended on March 17, 2017 with the officials of Colombia on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on April 17, 2017.
An Informational Annex prepared by the IMF staff.
A Statement by the Executive Director for Colombia.
The documents listed below have been or will be separately released.
Selected Issues
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
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© 2017 International Monetary Fund
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COLOMBIA
STAFF REPORT FOR THE 2017 ARTICLE IV CONSULTATION
April 17, 2017
Context. Colombia has a strong policy framework and fundamentals. Timely policy decisions have guided an orderly adjustment process to the large drop in the terms of trade experienced since 2014, aligning domestic demand with dimmer external conditions. Despite the growth slowdown last year and high inflation, poverty and inequality further improved. The current account deficit has narrowed significantly and inflationary pressures are gradually moderating. The banking system remains sound, but pockets of corporate vulnerability have emerged. The peace agreement with the FARC and the structural tax reform are important milestones that have reduced uncertainty and set the stage for a favorable outlook.
Outlook and risks. After a further slowdown in 2016, staff projects a mild growth rebound in 2017. The infrastructure agenda, the positive impact of the tax reform on investment, and improved confidence stemming from peace will underpin a gradual strengthening in medium-term growth. Downside risks relate in part to the sizeable (but declining) gross external financing needs and include volatility associated with the uncertain U.S. policy outlook and EM growth. Delays in investment including infrastructure projects, amid somewhat weak confidence and exports would hamper growth while a faster than expected implementation of the peace agreement will further strengthen the medium-term outlook.
Macro-financial policies. Further adjustment is needed this year, but policies could be eased somewhat. Policy easing should remain conditional on anchoring inflation expectations and further reducing the current account deficit. Strong policies and robust buffers should continue to cushion the impact of external shocks. Adopting Basel III standards and the conglomerates law will help manage corporate and cross-border risks.
Medium-term challenges. During the last decade, Colombia’s growth benefited from favorable demographics and high investment in response to the commodities boom. Going forward, inclusive growth will depend more on diversification supported by structural reforms including on improving infrastructure, streamlining regulation, easing trade barriers and strengthening the efficiency of public expenditure. The tax reform will boost medium-term inclusive growth by allowing a strengthening in public investment and social spending. The implementation of the peace agreement will foster regional development and improve the investment climate.
Approved By
Robert Rennhack and Mary Goodman
Discussions took place in Bogotá during March 6–17, 2017. The team comprised Jorge Roldós (Head), Sergi Lanau, Francisco Roch, and Daniel Rodríguez-Delgado (all WHD), Manrique Saenz (SPR), and Nombulelo Braiton (MCM). Tomás González (OED) participated in most of the meetings. Cristina Barbosa and Adrian Robles provided support from Headquarters.
Contents
RECENT DEVELOPMENTS: ORDERLY EXTERNAL ADJUSTMENT
OUTLOOK AND RISKS
KEY POLICY ISSUES
A. Policies to Facilitate the Adjustment and Recovery
B. Preserving Financial Stability
C. Tax Reform, Peace and Fiscal Sustainability
D. Policies to Strengthen Medium-Term Potential Growth
STAFF APPRAISAL
BOXES
1. Monetary and Financial Conditions
2. Slowdown Increases Credit Risk
3. Structural Tax Reform
4. Potential GDP Growth Outlook
5. Regional Convergence and Peace Agreement
FIGURES
1. Recent Economic Developments
2. External Sector Developments
3. Macroeconomic Policies
4. Recent Macro-Financial Developments
5. Corporate Developments
6. Structural Issues and Potential Growth
7. Social Indicators
TABLES
1. Selected Economic and Financial Indicators
2A. Summary Balance of Payments (in millions of US$)
2B. Summary Balance of Payments (in percent of GDP)
3. Operations of the Central Government
4. Operations of the Combined Public Sector
5. Monetary Indicators
6. Medium-Term Outlook
7. Financial Soundness Indicators
8. Indicators of External Vulnerability
9. Public Sector Debt Sustainability Analysis (DSA) – Baseline Scenario
10. Public DSA – Composition of Public Debt and Alternative Scenarios
11. External Debt Sustainability Framework, 2012–2022
12. External Debt Sustainability: Bound Tests
APPENDIX
I. External Sector Assessment
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COLOMBIA
STAFF REPORT FOR THE 2017 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX
April 17, 2017
Prepared By
The Western Hemisphere Department (In collaboration with other Departments)
Contents
FUND RELATIONS
WORLD BANK RELATIONS
INTER-AMERICAN DEVELOPMENT BANK RELATIONS
STATISTICAL ISSUES
Front Matter Page
Press Release No. 17/148
FOR IMMEDIATE RELEASE
May 4, 2017
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