Colombia Quarterly Investment Outlook by Posse Herrera Ruiz and EConcept

///Colombia Quarterly Investment Outlook by Posse Herrera Ruiz and EConcept

Colombia Quarterly Investment Outlook by Posse Herrera Ruiz and EConcept

Multidisciplinary law firm and member organisation of the British and Colombian Chamber of Commerce, Posse Herrera Ruiz, has released their Quarterly Investment Outlook, produced by EConcept economic consulting firm. In it, they analyse the latest of Colombia’s economic, social and political changes and what they will mean for the upcoming periods.

As such, they begin by acknowledging that the Colombian economy is recovering at a slow but steady pace with total GDP growth reaching 2.7% in the third quarter, quite similar to second quarter’s digits. In the same moderately optimistic trend, their forecast for 2019 ranges between 3.2% – 3.3%. The unfolding of the current political situation, especially regarding the tax reform, will determine a future outlook for all productive sectors and Colombian households.

On the social side, preliminary 2018 census results delivered many surprises: First, that there are around 46 million people living in Colombia (definitive results have yet to be published), and not the 50 million many had been projecting for years. Among major public policy implications: the country is richer than expected, at about $6,500 per capita GDP.

Added to the census, the firms do not overlook the impact that the more than 1,000,000 Venezuelan who have immigrated to Colombia over the last five years (unofficial estimates talk about 1.4 million) will have to the economy. As most are poor and expect to stay for a long time, it is no small task for Colombia to deal with this major shock.

The report asserts that Colombia has changed dramatically in the past 25 years, and is now similar to more developed countries. Hence, they assess, social and fiscal policy will both have to change and leave behind the characteristics that impede more dynamic growth, in order to eradicate poverty and to reduce inequalities.

In this sense, recently elected President Iván Duque seems caught between two swinging blades. He is faced with either having to form a solid coalition in Congress, and displease the left, or rethink his legislative reform strategy, and decide that governing is different from legislating (hence taking a less Congress-intensive course).

Meanwhile, his ministers’ proposed reforms, on taxes, the judiciary, oil royalties, telecoms and anti-corruption keep piling up in Congress. The outlook for most of them is in doubt.

Finally, the tax/financing reform is the most likely to save the H2 2018 congressional sessions. But the idea of applying a VAT rate to staple goods was unlikely from the beginning. Certainly, the government will end up with less tax collection, and more spending cuts. If we can see a final version being approved, we’ll also learn a great deal about how problems will be solved in the future, and the associated political costs.

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By |2019-02-04T10:16:18+00:00February 4th, 2019|News|0 Comments

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