Colombia breaks foreign debt record: exceeded US $ 150,000 million

The Banco de la República reported in its most recent report that at the end of August 2020, Colombia’s external debt reached US $ 150,505 million, which marks a new record for the country, since this indicator today represents 53% of GDP.

For its part, the report revealed that US $ 83,597 million correspond to public debt, of which US $ 697 million is short-term and US $ 82.9 billion is long-term.

On the other hand, external private debt reached US $ 66,909 million: US $ 22,962 million is short-term and US $ 43,946 million is long-term.

In August 2019, the foreign debt stood at US $ 135,765 million, which shows that the pandemic has increased debt in dollars by almost US $ 15,000 million.

However, despite the high external debt, in recent weeks it became known that Colombia managed to maintain investment grade in the main risk rating agencies: Fitch Ratings and Standard & Poor’s.

Of course, both rating agencies maintain the negative outlook on the rating and warn the government of the need to reduce the fiscal deficit and increase revenues.

By the end of 2020, the Colombian economy would register a 7.6% drop in the Gross Domestic Product (GDP), which, although it is described as a strong recession, would be less than that projected four months ago (8.5%). This is stated in the most recent Monetary Policy Report of the Banco de la República.

For 2020, the issuer expects growth to be between -9% and -6.5%, with -7.6% as the central value. For 2021 a variation of GDP between 3% and 7% is projected, with 4.6% as the central value.

“The growth forecast intervals for 2020 and 2021 were shortened, but they remain wide and reflect the high uncertainty that exists about the evolution of the pandemic, the possible measures necessary to face it and its effects on global and local economic activity”says the report.

For its part, the central bank pointed out that the indicators that can be analyzed at this time suggest that the annual fall in GDP for the third quarter would be around 9%.

In addition, for the remainder of 2020 and throughout 2021, there would be a slow recovery in the economy and employment, along with rising inflation, but lower than the target that was thought before the pandemic.

On the other hand, the Banco de la República made an estimate assuming that there will not be a significant acceleration of the contagion of covid-19, nor a further tightening of social distancing measures that significantly affect economic activity.

If this continues, it is expected that the gradual opening of the economy would continue and the supply of the sectors most affected by the pandemic would recover slowly as the easing of restrictions continues to advance.

On the other hand, a study by Fedesarrollo shows the changes in the labor market caused by the pandemic and suggests that it is time for reforms.

The Center for Economic and Social Research, Fedesarrollo, stated emphatically that it is time to propose labor reforms that “facilitate the recovery” of employment and allow a balance to be reached in the market, whose shortcomings have become evident with the COVID-19 crisis .

According to the study by Cristina Fernández, an economist and researcher at Fedesarrollo, in the first six months of the pandemic (April-September 2020) the number of unemployed people increased by 1.6 million, reaching 4.2 million Colombians , which means 19% of the economically active population.

According to the figures presented by the research entity, in the group of wage earners the participation of informality in the wage earning population went from 36% to 30% between April and September 2020 compared to 2019.

“This time the problem is more serious. For now we are going to have a recovery in employment, but with a higher share of informal work, “warned Fernández.

He also added that Colombia has 64% informality, a figure higher than the average of 50% for other countries in the region.

And he added that “We not only have the two evils, informality and unemployment, but also one of the highest rates of self-employed workers, it is almost double that registered for Latin America, due to the high costs of the formal labor market and the low productivity of some profiles ”, he explained.

Against this background, Fedesarrollo advised implementing a series of reforms that make the Colombian labor market more resistant to future shocks and prepare it, incidentally, to face long-term trends.

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