Tendencia Económica No. 215

Abstract

Editorial: The COVID-19 pandemic has caused the worst economic crisis in the country in more than a hundred years of history. We estimate that, because of the 6.8% contraction in productive activity in 2020, the poverty rate increased by about 6.2 percentage points, which is equivalent to three million additional people living in poverty. The pandemic has made major structural problems in the Colombian economy even more evident, such as the deficient targeting of public spending on subsidies, a labor informality of 60% of all employed persons, a pension coverage that is barely 25% of adult seniors of pensionable age, and a tax statute riddled with exemptions, with a low collection, not very progressive and that hinders the provision of quality public goods. This Editorial summarizes the proposals for a comprehensive reform that addresses four major issues in a unified way: social, labor, pension, and tax policies. We consider that crises are moments of opportunity to build consensus and implement reforms that allow correcting structural problems.

Actualidad: The country's external accounts registered historical decreases in 2020 because of the health, social and economic crisis caused by the COVID-19 pandemic and the shock in oil prices. Most of the Latin American countries registered decreases in the current account deficit and even in some cases went on to register a surplus. In the Colombian case, the correction in the deficit was associated with the fall in the commercial flow of goods and services and the deep decrease in factorial income. This situation again reflected the vulnerability of Colombian foreign trade to external shocks, mainly those associated with the prices of commodity goods, the difficulty that the country has had in diversifying exported products and inserting into global value chains. In this article we describe the behavior of the Colombian Balance of Payments during 2020. We will dedicate an analysis to each of the components of the current account: foreign trade of goods and services, factor income, and current transfers, and their registered financing in the financial account.