Tendencia Económica No. 245

Abstract

Editorial: During the pandemic, Central National Government (CNG) primary expenditure reached 20.2% of GDP in response to the growing needs to address the socioeconomic emergency generated by COVID-19. In turn, between 2019 and 2024, this is expected to increase from 15.7% to 19.9% of GDP. This increase has been attributed to the growth in investment spending associated with social transfers, as well as significant fiscal pressures stemming from the FEPC deficit, the pension and health component, and the inherent rigidity in the design of certain public spending components. Given the current scenario, everything indicates that it will be necessary to implement an adjustment mechanism in spending that will allow the adoption of a countercyclical fiscal policy in the face of possible future shocks. A first step in this direction could be to initiate discussions on policies of de-indexation and flexibilization of national government spending, with the aim of improving the prospects for fiscal consolidation in the medium and long term.

Actualidad: The Government published the update of the Financial Plan for the year 2024 (PF 2024) on February 8th. Initially, it is projected that the deficit of the Central National Government (CNG) will decrease in 2023 compared to 2022, dropping from 5.3% to 4.2% of GDP. However, the correction in the fiscal deficit observed between 2022 and 2023 would be completely reversed in the current year. Despite a reduction in expenditure, this would not compensate for decreases in tax revenues due to slower economic growth, judicial decisions, and the measure of litigation by the DIAN, as well as lower capital resources due to reduced dividends from Ecopetrol compared to what was expected in the General Budget of the Nation (GBN) 2024. Additionally, the fiscal deficit is expected to reach the limit allowed by the Fiscal Rule in 2024 (5.3% of GDP), which reduces the government's room for maneuver in case further negative contingencies materialize in the future. All these elements provide greater clarity on the need to implement a short-term fiscal adjustment strategy, considering the adverse macroeconomic context and the contingencies that have impacted government revenues.