Trade
proceeds favourably. According
to the most recent DANE figures, export growth continued to outpace import
expansion in October. Annual exports were up 19.6% over the same
period last year; driven principally by traditional exports, particularly
oil exports, which were up 29.4%. Import growth (+9.1%) was
propelled primarily by strong intermediate good inflows (+20.4%) and, to a
lesser extent, by 4.2% growth in consumer good imports. As a result
of the strong export expansion, the trade balance surplus is likely to
have widened further to US$ 1.7 billion. According to the Consensus
Forecast the trade surplus widened further in the last two months of the
year, reaching US$ 2.0 billion by year-end. This year, a moderation
in export growth (+3.8%) combined with a pick-up in import growth (+9.1%),
attributable to the healthier pace of economic growth, is expected to
lower the trade balance surplus to US$ 1.5 billion.
Tax
reform passed.
In late December, Congress approved the new tax reform law (Ley 633).
The key tax measures to be implemented in accordance with the new law
include: fixing the financial transactions tax at 0.03%, raising the value
added tax from 15% to 16%; and increasing the withholding tax to 6% by
2003. The government believes that the tax reform law is an
important step towards improving the tax take. Third quarter data
for last year indicate that the government managed to comply with its 0.7%
of GDP deficit target agreed to with the International Monetary Fund (IMF).
Reforms to the current pension and regional transfers system are on the
agenda for this year. Both reforms together with the new tax law
could serve to boost the sustainability of fiscal balances in the longer
term. Panellists believe that the government was successful in
containing last year’s fiscal deficit to the 3.6% of GDP limit agreed to
with the IMF, despite the retroactive Supreme Court-mandated wage hikes
for public sector employees towards the end of the year.
Furthermore, panellists remain confident in the government’s ability to
continue to lower the fiscal imbalance this year, although the forecast
(2.7% of GDP) remains slightly above the government’s target of 2.5% of
GDP.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Colombia. For more details please click here.
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