The Ministry of Finance and Public Credit presented an update of the 2023 Financial Plan through which it revealed what the government of President Gustavo Petro expects in economic matters, after a 2022 that was marked by a difficult situation both nationally and internationally.
Colombia’s gross domestic product (GDP) is expected to be 8.2 percent in 2022, a more positive figure compared to the 7.7 percent estimated last August. However, for next year, the figures are more pessimistic since economic activity would grow only 1.3 percentversus 1.8 percent previously forecast.
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The negative data also comes from the inflation side. The estimate for 2022 went from 9.9 to 12.2 percent in the same period of time and, although in 2023 it is expected to drop, it would be higher than the initially projected figure: it would go from 5.3 to 7.2 percent. Meanwhile, the exchange rate would remain between 4,700 and 4,800 pesosrepresenting a positive contribution to inflation.
The Minister of Finance, José Antonio Ocampo, highlighted that, despite the fact that the growth figure is low for next year, Colombia will continue to be the leading country in economic reactivation after the covid-19 pandemic. “It is a favorable level of economy that should also register in terms of employment,” added the official.
It is a favorable level of economy that should also be recorded in terms of employment
On the other hand, the fiscal balance of 2022 that was reviewed brings positive news in terms of tax collection, they are more than 2.2 trillion additional pesos due to a better dynamic of the economy and the depreciation of the Colombian peso against the dollar, which increases the collection.
Thanks to these resources, the National Government will be able to pay Ecopetrol, before the end of this year, 4 billion pesos in order to partially settle the pending account of the Fuel Price Stabilization Fund (FEPC), which April and November reached approximately 24 billion pesos.
The minister also stressed that the fiscal deficit in 2022 would be located at 5.5 percent of GDP, an improvement of 1.6 percentage points compared to the deficit registered in 2021 (7.1 percent). This implies that the fiscal rule is being exceeded by 2.9 percent of GDP.
As a result of this reduction in the fiscal deficit, the Government’s debt would be reduced from 60.8 percent of GDP in 2021 to 59.6 percent in 2022, while for the following year it would fall to 57.5 percent of GDP.
In 2023, the Government plans to continue with the process of adjustment and consolidation of public finances. In this sense, according to the Ministry of Finance, it is estimated that the total income is 319.3 billion pesos (20.6 of GDP) due to a higher tax collection, as expected, due to the entry into force of the tax reform, through which 20.3 trillion pesos would be collected, which is added to the growth of the Nominal GDP and the depreciation of the peso against the dollar. An additional 80.6 trillion pesos would enter, which represents an increase of 33.8 percent when compared to the figures for 2022.
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On the spending side, it would reach 378.6 trillion pesos (24.4 percent of GDP), and compared to this year’s estimate (318.1 trillion pesos), it would grow 19 percent (60.4 trillion pesos). pesos). This figure includes increased spending on social programs and 26.3 trillion pesos to pay the entire FEPC deficit caused between the second and fourth quarter of this year.
Another announcement that was made in the framework of the presentation of the Financial Plan is that in February the Ministry of Finance plans to present to the Congress of the Republic a budget addition for 20 billion pesos that will be allocated to higher primary spending. These resources will be used, mainly, to finance the agrarian reform, tertiary roads, health, free university education and the peace, aqueduct and housing programs.
The higher income would make the fiscal deficit is reduced to 3.8 percent of GDP in 2023, with an additional fiscal adjustment of 1.7 percentage points of GDP (compared to 2022) and with an overcompliance with the fiscal rule of 0.3 percent of GDP. “These are two consecutive years of fiscal adjustment and it is the strongest that has occurred in the history of Colombia since 1993. This is, perhaps, the clearest demonstration of fiscal responsibility that the National Government has,” said Minister Ocampo.
These are two consecutive years of fiscal adjustment and it is the strongest that has occurred in the history of Colombia since 1993
Likewise, he stressed that the fiscal rule is complied with “more than” both this year and next, while the fiscal adjustment in the Government of 2.8 percentage points of GDP between 2022 and 2023 is the highest since they have been balance sheet estimates (2001).
In terms of financing, external disbursements of 24.2 trillion pesos are expected, of which 14.2 trillion pesos will be used to finance the 2023 period and the remaining 9.9 trillion pesos to pre-finance 2024, which which will allow the Nation to prepare for the amortizations of that year. About 60 percent of these resources will come from loans with multilateral and bilateral organizations and the remaining percentage from the international capital market.
Regarding internal resources, they are contemplated TES issues for more than 36.2 trillion pesos (2.3 percent of GDP), of which 27 trillion pesos will be obtained from auctions and syndications, 1 trillion pesos through the issuance of Green TES in the local market –a decrease in the total of 16 auctions percent compared to 2022– and 8.21 trillion pesos through direct placements.
“There will be less issuance of TES, which gives this market a chance to continue improving its financial conditions, as has been happening. Furthermore, we hope that, with the low inflation that we are forecasting, there is also a drop in TES rates“said the minister.
New hikes in gasoline
In 2023 there will be new increases in the price of gasoline and the announcement of how much it will rise will be made the other week, once the approval of President Gustavo Petro is received. “Yes there is a continuous adjustment of pricesinitially from gasoline, continuing what we have done in the last three months,” said the finance minister.
Since October, the price of a gallon has risen 200 pesos each month, for a total of 600 pesos in the last three months. Meanwhile, the price of diesel will be frozen until June 2023 in order not to affect the costs of public transport and merchandise.
In this way, the Government seeks to reduce the deficit presented by the FEPC, which would be approximately 20 billion pesos, as of November, after the payment that would be made to Ecopetrol in the coming days.