Author/Editor:

International Monetary Fund. Western Hemisphere Dept.

Publication Date:

May 4, 2020

Electronic Access:

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Summary:

Before the Covid-19 pandemic and subsequent global disruption, Colombia’s recovery showed resilience despite a weak external environment thanks to its very strong economic policy framework and timely policy actions. The flexible exchange rate, combined with an inflation-targeting regime, effective financial sector supervision and regulation, and adherence to the fiscal rule, allowed the country to smooth the impact of a large permanent terms of trade deterioration between 2014-2016, laying the foundations for the economic recovery that was underway. Moreover, Colombia made remarkable efforts to receive and integrate a substantial number of migrants from Venezuela that helped boost domestic demand and imports. However, exports were weighed down by unfavorable commodity prices and weak partner country growth. Thus, the external deficit widened, though it was comfortably financed, largely through FDI.