Tendencia Económica. No. 208

Abstract

Colombia will have its first recession in 20 years because of the health crisis caused by the COVID-19 pandemic. For this year we maintained our GDP forecasts, but with changes in the sectoral composition according to the second quarter productive activity results. In 2020, GDP would have a contraction between 5.0% and 7.9% with a reduction in value added in 9 of the 12 economic sectors. This result would translate into a current account deficit that would be in a range of 3.5% and 4.8% of GDP and a public debt that would increase to levels between 65.3% and 67.7% of GDP. By 2021, we expect the economy to enter a recovery path, registering an economic growth rate between 3.5% and 4.4% and a correction of the current account deficit as a percentage of GDP to levels of 3.3% and 3.9%. However, the fiscal outlook would not be clear, since, although there would be a reduction in the central government deficit as a percentage of GDP from a range of 8.4% and 8.8% to an interval of 5.4% and 5.6%, public debt as a percentage of GDP would increase to levels between 66.4% and 68.2%. On July 29, the Ministry of Finance and Public Credit presented to Congress the draft bill of the General Budget for the fiscal period of 2021. Through this document, the National Government defines the amount and sources of financing and establishes the rules for the execution of these resources. Therefore, it´s important that the budget approved by the Congress in the coming months is in line with the macroeconomic parameters and fiscal goals established in the Medium Term Fiscal Framework, especially at this time where socioeconomic demands are greater and there is no Fiscal Rule, an instrument that ensures the sustainability of public finances. In this article we analyze the General Budget 2021.