The debate about growth

The government’s forecast for the country’s growth in 2021 is 9.5%, compared to the fateful year of the pandemic. The projection used by Banco de la República, prepared by the Latin American Consensus forecast, projects somewhat lower growth of 8.6%. It is clearly a fairer measure than the government’s chosen to spread propaganda. Compared to the growth of other Latin American countries, Colombia is lower than Peru (12.1%), Chile (11.1%) and the same as Argentina, but it exceeds the good average of Latin America (6.5%).).

President Duque puffed his chest, patted his back and assured, “We will grow to the highest level in 115 years. This is a huge achievement for the country.” What he did not say is that in 2020 the economy shrank by about 7%, so that if you compare 2021 with the level of 2019, Colombia grew by only 1.2%.

Duque neither mentioned his 115-year record nor was he told that Colombia grew more than 8% on seven other occasions, as documented by the Banco de la República Economic Growth (Greco) Study Group. It is better that the chief should not begin fishing in the turbulent river of history without sufficient knowledge of the subject which he certainly did not dictate to Sergio. It should also be taken into account that 8.6% growth after a 6.8% decline, as happened in 2020, is not normal.

What has been effective on the part of the government is the COVID-19 vaccination campaign that has led to a drastic drop in cases, which has been behind the strong recovery in the economy. Many analysts warned that higher growth could lead to hyperactivity and higher inflation. Alerts were not heeded by the jubilant president, who decreed a 3-day VAT-free period during which he lost $6 billion in tax collection, exacerbating a large fiscal deficit, and is also spending profligately, owing the country in dollars.

What will mask the government’s achievements is an inflation rate of 5.5%, well above Banco de la República’s target of 3%; Gasoline has just been sprayed on all of the above by expectations resulting from the 10% increase in the minimum wage enacted by Duque. It was a measure contrary to the one taken by the Banco de la República board, which raised the interest rate by 50 points, precisely to curb inflation.

Unions interpret the salary increase as a reaction to the social outbreak in April and we can add that it was not expressed in the May 2022 elections. Another collateral damage of the decision is that it will increase unemployment, which has not returned to its normal level and is already very high.

According to analyst Mounir Jalil, the rise in food prices reached 15.3% as of November, and regulated prices reached 6.6%, pressures that will continue until mid-2022. The depreciation of the peso against the dollar was 17% in one year, which intensified inflation, which He is also fueled by investors’ mistrust of the country’s future, and he’s not just against Petro. In fact, the country’s risk perception index scored 135 in November, compared to 70 in Latin America.

The year that has passed has been a year of remarkable recovery for the economy but it is still not enough. There are still great uncertainties that will not become clear until after the presidential election. For now, I wish my sick readers a happy and prosperous 2022.