Press Release No. 12/447

Press Release: IMF Concludes 2012 Article IV Mission to Colombia

November 19, 2012

An International Monetary Fund (IMF) mission, led by Ms. Valerie Cerra, visited Bogotá from November 6-16, 2012 to hold the annual Article IV consultation.ⁱ The team held discussions with the authorities and the private sector about recent economic and financial developments, and the near- and medium-term outlook. At the end of the mission, Ms. Cerra issued the following statement in Bogotá on November 16:

“Colombia has a strong policy framework, which has underpinned its resilience to the global turbulence of recent years. Prudent monetary and fiscal management, a flexible exchange rate, and a sound financial system helped mitigate the impact of those external shocks and stabilize growth relative to peer countries, as illustrated by the particularly buoyant economy activity in 2011.

“The moderation of growth observed in 2012 is largely the consequence of the demand management policies adopted last year to contain risks. The monetary tightening and macro-prudential measures to stem high credit growth and the measures to reduce the fiscal deficit and public debt have brought about a welcome moderation in aggregate demand. Ripple effects from the weak external environment and unexpected supply shocks also have contributed to dampen economic activity. Reflecting all these factors, real GDP in 2012 is projected to be slightly lower than 4½ percent.

“In 2013 and beyond, we expect growth to hover around 4½ percent (which we regard as Colombia’s sustainable growth rate) and inflation to remain within the 2-4 percent target range. The stance of monetary and fiscal policy planned for 2013 seems consistent with the expected pickup in economic activity, but risks remain tilted to the downside given continued global uncertainty. The flexible exchange rate and monetary policy should continue to be used to buffer adverse external shocks.

“Colombia has a strong fiscal framework, which has been improved further by the adoption of the fiscal rule, the fiscal responsibility requirement, and the royalties reform. Public debt has been declining, helped by the double tailwinds of high commodity prices and favorable international financing conditions. The authorities should build on this success to develop a broader revenue base. In addition, a faster pace of fiscal consolidation or a more ambitious target could help ease pressures on the exchange rate, as well as build fiscal buffers against adverse commodity shocks.

“As in other countries in the region, Colombia’s key medium-term challenge is to sustain stable, non-inflationary and inclusive growth. From this perspective, the mission welcomes the proposed tax reform, which would help reduce labor costs and informality, spur employment, and decrease inequality.

“The consultation will conclude with the preparation of a report to be discussed by the IMF Executive Board in January 2013. The mission wishes to thank the Colombian authorities for their warm hospitality and open discussions during the mission.”

ⁱ Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.