EconomyFinancialBlockades and pandemic may slow down the recovery of...

Blockades and pandemic may slow down the recovery of the Colombian economy

The OECD projects that the country’s gross domestic product (GDP) will grow 7.6% this year and fall to 3.5% in 2022. ”The economy has recovered strongly since the second half of 2020, but the Social unrest and renewed mobility restrictions in April and May 2021 will delay a more consistent recovery to the second half of 2021, ″ the agency noted.

The Colombian economy has shown a recovery since the second half of 2020, but the pace of growth may be affected by mobility restrictions caused by the pandemic and social protests, according to the OECD outlook report released today.

The agency projects that the country’s gross domestic product (GDP) will grow 7.6% this year and fall to 3.5% in 2022.

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“The economy has recovered strongly since the second half of 2020, but social unrest and renewed restrictions on mobility in April and May 2021 will delay a more consistent recovery to the second half of 2021,” the OECD noted in its country report.

After the 15.5% collapse that it had in the second quarter of 2020 due to the quarantine due to the pandemic, the country’s GDP cushioned the fall to -8.5% in the third and -3.6% in the fourth , to close the year with an accumulated decrease of 6.8%.

In the first quarter of this year the economy gave new signs of recovery thanks to the gradual reopening of productive activities and expanded by 1.1%, but the current situation, with a third peak of the covid-19 pandemic that seems never ending and protests in the streets, can affect your performance.

“GDP continued its strong expansion in the first quarter of 2021. Since then, consumer confidence has fallen dramatically amidst social protests, roadblocks and supply chain disruptions,” the report added.

A MONTH OF PROTESTS

Since April 28, Colombia has experienced a wave of protests that began with popular rejection of the Government’s tax reform project and, despite the fact that President Iván Duque was forced to withdraw it, the demonstrations have continued with other claims that have given foot to vandalism of infrastructure destruction and road and avenue blockades.

“The widespread social unrest, but also the new localized blockages are affecting the recovery and postponing a greater recovery of private consumption and investment to the second half of 2021,” the report underlines.

Regarding reforms, the OECD notes that “a significant fiscal response” would help the economy this year and “public finances could strengthen progressively” as the recovery progresses.

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“A new package of reforms should strengthen fiscal sustainability, create a new fiscal space to expand social protection and address structural deficiencies in the tax system, including low progressivity and fairness,” he added.

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For the agency, if there is no “consensus to strengthen public finances, the financing costs” of Colombia’s debt in international markets could rise.

On May 20, the risk rating agency Standard & Poor’s (S&P) lowered Colombia’s credit rating in foreign currency from BBB- to BB + with a stable outlook, with which the country lost the investment grade it had for more than a decade, what practice should make the cost of money more expensive in its debt issues.

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Furthermore, according to the OECD, “a significant reform of the fragmented social security system could increase low-coverage pensions and reduce poverty in old age”, while in the labor market “ambitious reforms are necessary to strengthen the creation of formal employment ”.

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