Many Colombians — and people throughout the world — are happy to say goodbye to 2016. It was a challenging year both economically and politically. It belongs in the rearview mirror so that 2017 can bring better fortunes to the masses.
It is will this hopeful view that Bancolombia, the largest financial institution in Colombia, offers its “12 Wishes for 2017.” Now an annual tradition, the Medellín-based bank has allowed Finance Colombia to re-publish its view here in full. Enjoy the following outlook directly from Bancolombia.
As is tradition at this time of year, we leave aside momentarily our projections and list what we would like to happen to the Colombian economy in the next twelve months.
In our previous edition we anticipated we would live a year full of economic challenges and reality confirmed that expectation. However, we believe that Colombia is bottoming out, and that from 2017 a trend shift will consolidate leading to a more favorable macroeconomic environment. In the midst of undeniable challenges, the following wishes can lead us to have a better country, the one we want for everyone.
1. We want Colombia to successfully overcome the challenges of the global environment. In addition to the political turmoil experienced by countries such as Germany and France, the global economy will face the uncertainty the new US administration will bring in addition to increases in interest rates by the Fed and concerns about a disorderly adjustment of the Chinese economy. We expect emerging countries, including Colombia, to be able to adapt to this new environment. This will involve making the right decisions to mitigate external vulnerabilities.
2. We want the productive activity to accelerate. Due to a sharp slowdown in domestic demand, GDP growth is likely to reach 1.8% this year. For 2017, we want it to initiate a phase of greater growth, which we expect to take full form in 2018 and 2019.
3. We want sectoral growth to be more balanced. Not only do we expect the economy to grow more in 2017, it’s also important for the sources of expansion of our productive apparatus to be diversified. In particular, we would like key activities from different sectors and which have experienced a difficult last year, such as agriculture, mining, trade and transport, to regain their momentum.
4. We expect private investment to reinvigorate. After a phase of sustained increases, productive investment has been the component of demand most affected by the macro context in 2016. Given its importance in economic development, one of our key wishes for 2017 is that investment decisions gain momentum supported by several catalysts. These include increased terms of trade, falling inflation, repo rate cuts, improved business confidence and the stabilization of the exchange rate.
5. We expect the economy to constructively absorb the tax reform. The adjustment to the tax code was one of the most anticipated economic events this year. Its recent approval by Congress will allow us to dispel doubts about the fiscal outlook in 2017. From now on, we expect the benefits generated by these adjustments will outweigh the costs some agents will inevitably have to assume, and the country to continue taking measures that ensure the sustainability of public finances.
6. We want the foundations of financial stability to strengthen. It is our hope that in 2017, within the framework of the expected reduction in interest rates, economic agents rigorously assess financial risks and make decisions in accordance with their mitigation, that companies and households appropriately manage their financial burden, and that more Colombians can access formal financing.
7. We want inflation to end next year within the Central Bank’s target range. Despite the fact that in recent months the increase in prices has been mitigated, Colombia will continue to face significant inflationary risks in 2017. These include the increase in the VAT rate and the persistence of high readings in non-tradables. We expect the economy to benefit from this scenario, so that the Central Bank fulfills its commitment of inflation closing 2017 below 4%.
8. We want infrastructure projects to be implemented properly. We want the first advances in the 4G projects that have occurred this year to be the beginning of a timely and efficient construction period. As a result, Colombia will not only be once again one of the fastest growing economies in the region, but will also realize gains in competitiveness and greater job creation.
9. We want to stimulate job creation. A healthy labor market is essential for a robust domestic market. Despite the fact that in the last year the emergence of new jobs has been affected by the productive slowdown, the fall in the participation rate has meant that the recovery in unemployment is limited. Our hope is that unemployment will resume a downward trend supported by the creation of formal jobs, so that more Colombians find stable sources of livelihood.
10. We want the external imbalance of the country to continue to adjust. Since one of our major weaknesses in recent years is the massive current account deficit, we want the transformation of the economy to form the basis basis for closing this gap consistently. This will allow the integration of Colombia into the world economy to be more balanced, and the dependence on external capital flows will be gradually lower.
11. We also want Colombia to take firm steps towards greater productivity. We want the authorities and private entities to articulate efforts to achieve efficiency gains that make our companies more productive. In addition to fostering a stable macro environment, this also means advancing micro agendas that impact potential growth.
12. Finally, we expect peace to be consolidated. In the post-conflict era the country is entering we want the different actors to show the willingness that reaffirms the peace process, allowing the economic dividends of this leap our society is taking to materialize.