After growing at over 4% rate in the recent years, the Colombian economy showed a variation of 2.8% in the first quarter of this year.
Why it might be the deterioation?
The Colombian economy began to slow down this year. According to the figures released by DANE, the Gross Domestic Product (GDP) registered a variation of 2.8% in the first quarter of this year, a figure much lower comparing to the same period of last year which was 6.5%.
This decline is largely explained by the behavior of two sectors. One is the industry, despite of several plans announced by the government; this sector registered a fall of 2.1% in the first quarter.
Companies started to feel more severely this year the latest tax increase approved by Congress, which has resulted in higher payments and lower profits to the Treasury. Additionally, some importing companies and those with a high external debt have also been affected by the higher devaluation of the Colombian Peso.
However another of the sectors that has not good expectations for the coming future is the mining and energy sector. Due to the collapse of the oil price in more than 50% those sector registered a fall of 0.1%. The impact on the economy is huge considering that about 70% of Colombian exports are oil, coal and other commodities. In addition, about 30% of the government’s revenues are coming by this economic sector.
Hence, the Government has announced adjustments to cope with the gap in the public finances that would amount up to 12 billion pesos as a result of this collapse.
However, on the other side, the growth of the economy is being supported by the construction sector 4.9%, international trade 5% and financial services 4.4%. Regarding the construction and public sector the government hopes they to become the economic boosters. Therefore, it has been announced plans to finance new housing promotion with low interest rates and subsidizing the poorer classes so they can buy a property.
Even though the economic growth has been lower than expected, it is fair to recognize that Colombian economy is one of the best among Latin American ones, due to they have performed better after the global crisis in the oil sector.
Finance Minister Mauricio Cardenas said that a growth around 3% would be remarkable because it keeps the country as the fastest growing country within the largest countries in the region, being the second country most promising for 2016, after the new scenario of oil prices.