Colombia: Macroeconomic Country Outlook
- GlobalData forecasts the real GDP of Colombia to grow by 4.4% in 2022, almost all COVID-19 restrictions are lifted to support the resumption of economic activities.
- Colombia was ranked 50th out of 136 nations in the GCRI Q1 2022.
- In 2022, the household consumption expenditure is forecast to expand by 2.7% and at an average annual rate of 2.7% over 2023–2024 as the economic recovery strengthens.
Colombia is extremely rich in mineral and energy resources, especially in coffee, oil and gas, coal, and gold. It is one of the largest coal and oil producers in the Latin American and Caribbean region. The country’s crude oil reserves stood at 2.03 billion barrels in 2020, which is fourth highest in the Latin American region, according to the OPEC database.
Key Findings
- Improving international relations: The country is a part of the Organization of American States (OAS). Brazil is an active participant in international groups such as G20, the United Nations (UN), and World Trade Organization (WTO). In September 2021, Colombia and the European Union entered into a contract to enhance bilateral relations for the next decade. In November 2021, Colombia and Germany signed a defense cooperation agreement, which aims to strengthen bilateral relations between the two countries by deepening cooperation in the field of defense along with activities of common interest around security. In January 2022, Colombia and Singapore signed a Memorandum of Understanding (MoU) to deepen economic ties. The agreement would also provide opportunities to collaborate in technology and innovation. In March 2022, Colombia signed a MoU with Egypt to boost bilateral economic cooperation through joint trade, industry and investment among nations.
- Colombia was ranked 67th out of 190 countries in the World Bank’s Doing Business ranking for 2020: In the World Banks’ Doing Business Report (2020), Colombia was ranked 67th out of 190 economies, with a score of 70.1. It takes 10 days and seven procedures to start a business in Colombia, compared to the OECD high-income average of 9.2 days with 4.9 procedures. Colombia was ranked 11th in terms of getting credit, 13th in terms of protecting minority investors, and 32nd in terms of resolving insolvency. However, the country secured 177th rank for enforcing contracts and 148th for paying taxes.
- Low gender gap in the country: According to the World Economic Forum’s Global Gender Gap Index – 2021, Colombia is ranked 59th out of 156 countries, which is a higher rank compared to Peru (62nd) and Brazil (93rd). The country was ranked 60th out of 156 countries in terms of economic participation and job opportunities in the Global Gender Gap Index – 2021. Colombia secured first rank for educational attainment among 156 nations. Therefore, high female labor force participation rate acts as an assistance to the overall growth of economy.
- Economic recovery to sustain: According to GlobalData, the real GDP contracted by 6.8% in 2020. Strict lockdown restrictions, disrupted trade, and poor consumer confidence resulted in an overall decline in consumption expenditure in 2020. However, according to GlobalData, the real GDP growth rate of Colombia expanded by 8.6% in 2021, driven mainly by private and public consumption. In 2021, the real household consumption expenditure expanded by 5.6% from a contraction of 7.8% in the previous year. A pickup in global trade and business confidence index also aided the economic recovery. The real GDP is further forecast to rise by 4.4% in 2022 and 3.1% in 2023.
- Corruption in Colombia is among worst in Latin America: Despite economic growth, better security conditions, improvements in rule of law and implementation of institutional reforms, high levels of corruption damage Colombia. In addition to political corruption, cases of collusion between national security forces and narco-paramilitary groups have also come to the fore. Colombia was ranked 87th out of 190 nations with score of 39 (out of 100) in Transparency Internationals’ Corruption Perceptions Index (2021). In March 2021, former president of Colombia’s Supreme Court, Francisco Ricaurte was sentenced to 19 years in prison on charges of bribery.
- Step towards renewable energy: In February 2022, Colombia signed a MoU with the Port of Rotterdam for export and import of low-carbon and green hydrogen among both nations. In March 2022, the country inaugurated 1.2MW solar photovoltaic (PV) park at the Air Force Base in Palanquero, which would meet 24% of the military base’s power demand. Therefore, the air force base would be able to save an estimated amount of $16,800 per month. During the same month, the Mayor of the Colombian city of Barranquilla announced to sign a MoU with Copenhagen Infrastructure Partners (CIP) for a 350 MW offshore wind project, which would require an investment of almost $1 billion. According to the World Bank, Colombia could develop up to 50GW of offshore wind capacity. Moreover, the country envisages attracting investments of up to $27 billion by 2050.
Key Fundamentals
Sectoral Outlook
- Support for the renewable energy sector in the country: In March 2022, the Government of Colombia inaugurated a pair of electrolysers in the city of Cartagena to produce green hydrogen. Ecopetrol, a Colombia-based oil producer company announced to invest $140 million each year by 2040 for the production of green, blue and white hydrogen as part of the effort to reduce emissions by mid-century. During the same year, the Mayor of Colombian city of Barranquilla announced to sign an agreement with the Danish offshore for a 350 MW offshore wind project. The project would attract investments of up to $27 billion in the country by 2050. In March 2022, Colombian power company Celsia entered into a partnership with Grupo Bancolombia Capital to launch an investment platform, which aims to finance and build solar energy projects for businesses in Colombia.
- Construction industry to grow at a robust pace: With a number of major infrastructure projects in pipeline, the demand for construction and allied industries is expected to expand. The government is planning to spend $70 billion by 2035 to improve connectivity and promote internal trade by reducing transport time. The project includes various infrastructure in the country, which includes more than 100 road projects over more than 12,500 km, more than 1,600 km of new rail lines, maritime projects on eight rivers covering 5,000 km, 31 airport expansions and major port developments in Colombia. In March 2022, Colombia’s highway authority awarded roadworks contracts of $143 million in the departments of Cauca, Choco and Putumayo. According to GlobalData, the construction section grew by 8.8% in 2021 and is forecast to grow by 7.2% in 2022.
- Agriculture sector to flourish: Support for the renewable energy sector in the country: In March 2022, the Government of Colombia inaugurated a pair of electrolysers in the city of Cartagena to produce green hydrogen. Ecopetrol, a Colombia-based oil producer company announced to invest $140 million each year by 2040 for the production of green, blue and white hydrogen as part of the effort to reduce emissions by mid-century. During the same year, the Mayor of Colombian city of Barranquilla announced to sign an agreement with the Danish offshore for a 350 MW offshore wind project. The project would attract investments of up to $27 billion in the country by 2050. In March 2022, Colombian power company Celsia entered into a partnership with Grupo Bancolombia Capital to launch an investment platform, which aims to finance and build solar energy projects for businesses in Colombia.
- Positive outlook for retail sector over next year (2022): In 2021, the real household consumption expenditure grew by 5.6%. Furthermore, in 2022, the household consumption expenditure is forecast to expand by 2.7% and at an average annual rate of 2.7% over 2023–2024 as the economic recovery strengthens. The rising real household consumption expenditure is likely to boost the retail sector. E-commerce is also expected to grow, due to expansion of mobile/internet penetration in the country.
GlobalData Country Risk Index (GCRI) - Q4 2021
Colombia was ranked 50th out of 136 nations in the GCRI Q1 2022. The country’s score was in the manageable risk nations band (40–50). Colombia‘s overall risk score is lower than the Latin America and the world average in Q1 2022. The country had an overall score of 41.1. In all parameters of the risk index, Colombia’s score was lower than the regional average. Precarious peace process in the country, the threat of a breakout of internal conflict, and high crime rates have added to the risk of Colombia.
GCRI Methodology
GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies based on historical developments in an economy.
The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources, and also proprietary data from GlobalData. Latin American nations in this publication include Venezuela, Brazil, Chile, Colombia, Mexico, Peru, Argentina, and Ecuador.
About the Report
GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.
More details: Macroeconomic Outlook Report: Colombia
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