Tendencia Económica. Informe Mensual de Fedesarrollo. No. 168

Abstract

The situation of public finances is, without a doubt, the most important subject regarding the macroeconomic stabilization of Colombia in the next few years. The National Government’s fiscal deficit for 2016 is projected to be 3.9% of GDP. In the absence of tax policy implementation, the deficit could easily exceed 5% of GDP by the end of this decade. Consequently, is essential to implement a tax reform that achieves three objectives: i) avoid the tax revenue slump that follows the completion of some temporal taxes, ii) partially replace the tax resources which are lost by the reduction of oil revenue, and iii) change the structure of the current tax system to make it more fair, progressive, simple and efficient. The GDP growth for the first half of the year (2.3%) was the lowest since the second half of 2009 and some leading indicators for the third quarter suggest a similar growth in the rest of the year. In this context, we revised 2.3% growth projection for 2016, with a slight reduction compared with 2.5% we forecast in May.