EL ESPECTADOR

The Real-World Limits Of Colombia's Economic Growth

The economy is expected to have a relatively strong year. But will the average Colombian really benefit?

National strike in Bogota, Colombia on Jan. 16, 2020.
National strike in Bogota, Colombia on Jan. 16, 2020.
Gonzalo Hernandez*

-Analysis-

BOGOTA — Colombia's conservative government should be happy with the thumbs up it received at the start of the year from the World Bank.

The agency expects the Colombian economy to grow by 3.6% this year, quite above the average rate for Latin America (1.8%). What's more, in making its prediction, the World Bank reiterated the government's own argument: that its fiscal policy incentives will boost private investment.

What the Bank didn't mention in its flagship report, Global Economic Prospects is the so-called Orange Economy that President Iván Duque talks so much about. But the study did point to three other elements that will positively impact growth in Colombia in 2020: better financing conditions to strengthen domestic demand; execution of infrastructure plans and especially 4th Generation roads; and implementation of reforms recommended within the OECD's 2016-25 Productive Transformation agenda.

These last two initiatives are legacies of the previous administration, which is why the Duque government prefers to publicize them less.

Let us see if the World Bank maintains its positive posture in coming months.

Of the four elements that justify the positive scenario for Colombia, public investment in infrastructures appears to be the most specific and direct. Yet the report does not estimate its effect on growth, nor explain the source of financing for internal demand. The reforms in the government's Productive Development Policy point more toward long-term effects than to results in 2020. And for now, at least, any talk about how the tax benefits introduced in the government's most recent reform might spur growth is more wishful thinking than anything else.

Looking ahead, furthermore, we might even end up with a policy that increases the fiscal deficit with more regressive taxation and little or no additional growth as a result. Let us see if the World Bank maintains its positive posture in coming months.

What's striking, therefore, is how the World Bank justifies its optimism. Also worth noting is what the agency report didn't mention: the positive impact that reduced fighting (following the peace pact that Duque's predecessor, Juan Manuel Santos, signed with the FARC guerrillas) is having on private investment.

This is all the more surprising given that the same agency has made just that connection — drawing a line between peace and productivity — with regards to Sub-Saharan Africa. Was this political?

The positive predictions for the economy have not of course done much to boost Duque's low approval numbers or quell anti-government protests that have been ongoing and that the World Bank report, interestingly, cites as a risk element for growth in 2020.

It's up to the government, therefore, to convince citizens that this positive outlook in an adverse Latin American context means better welfare for people; that there will be more jobs and higher incomes. And if it really believes in its Economic Growth Law, then let the Duque administration, in its round-table meetings with opponents, promise more resources for education and healthcare.

If it doesn't, the World Bank's positive outlook will not so much cause the government satisfaction as become a political liability for the president. And that's because people will surely want to know why, if the economy is doing so well, the average Colombian isn't.

*The author is an economist and researcher at the Pontificia Universidad Javeriana in Bogota, Colombia.

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Betancourt in Bogota announcing her candidacy Tuesday

Chepa Beltran/LongVisual via ZUMA
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-Analysis-

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