Colombia showed an economic growth of 5.9% in 2011, this figure was broadcast last week, behind this high figure and ephemeral happy time for central government, there is a real problem to reach the objective of real income distribution such as government want to broadcast to society, first: Colombia is over its long run economic growth which is around 4.0% per year according with official calculations, it means a scenario with high probability to reach high inflation, reducing local purchasing power, this issue is worked by Central Bank through high interest loan rate right now, moreover this high growth can increase concentration of income due to a high GINI index of 0.56 (income concentration index, 0: ideal distribution; 1: high concentration); second: 1.0% of GDP growth comes from Mining and 1.1% comes from Financial sector, this means that 2.1% out of 5.9% is from sectors which do not add to much value added to the economy, moreover last week was broadcast by media that Ecopetrol, the biggest oil crude colombian public company, is investing our royalties in speculative finical instruments, therefore money that should be invested in education and health sector is going to money pocket.
Autor: Humberto Bernal,
Economista,
e-mail: zhumber@gmail.com
It can be download at:
Colombia showed a high Gross Domestic Product (GDP) growth in 2011, it was 5.9%, this figure was broadcast last week by the official bureau of statistics in Colombia (DANE), this GDP growth is above from its long rung growth that is around 4.0%, Central government should be careful on this issue due to high growth can bring high cost through high inflation and perverse income distribution, therefore it is the right time to take advantage of this high economic growth to start to bring real income distribution to population through better infrastructure, more sources to education through lower interest rate (it will be great Central Bank lending rate called “Lombada de expanción” was charged to students), better transport system in capital cities and so.
Table 1 shows the economic growth for each economic sector and their contribution to GDP growth, one can realize that Mining and Financial sector are the main sectors that contribute to GDP growth with 1.0% and 1.1% respectively, these sectors are the main ones that have to lead the work to get a better income distribution throughout high royalties which must go to real infrastructure, education and health sector. Nevertheless, it must to be highlighted, public servants in charge of royalties such as Ecopetrol president, Treasury chief and Mining chief do not have to speculate with these royalties in financial sector looking for their own benefits as was broadcast last week by media, these royalties are for economic development and population. Moreover, Financial sector has a social debt with population due to lot of financial crisis (financial bubbles) which are payed with our taxes, therefore colombian financial sector should distribute their benefits through low tariff on their financial products such as free debit card use, increasing their loans to microcredit users (loans to small firms projects) and increasing supervision on public accounts to decrease public corruption, hopefully through Basel III ( Bank for International Settlements agreement III) financial sector will demand (employ) people who look for social benefit where every body win instead of high benefits owned by owners of these financial institutions.
Table 1. Gross Domestic Product growth by economic sector
2011
Sector
|
Growth by sector (2011)
|
Growth Contribution to GDP (2011)
|
Primary sector (agriculture)
|
2.2%
|
0.1%
|
Mining, coal and crude oil
|
14.3%
|
1.0%
|
Manufacture sector
|
3.9%
|
0.5%
|
Supply energy, gas and water
|
1.8%
|
0.1%
|
Construction
|
5.7%
|
0.3%
|
Commerce, hotels and restaurants
|
5.9%
|
0.7%
|
Transport, store and communications
|
6.9%
|
0.5%
|
Financial sector and insurances
|
5.8%
|
1.1%
|
Social services and community sectors
|
3.1%
|
0.5%
|
Subtotal Value added
|
5.5%
|
5.0%
|
Total taxes
|
10.8%
|
1.0%
|
Gross Domestic Product
|
5.9%
|
5.9%
|
Source: Bureau of statistics (DANE).
GDP growth by spending component was lead by private consumption and investment with 4.3% and 4.2% respectively as table 2 shows. Exports shows a growth of 11.4% and it contributes with just 1.8% to GDP growth. Imports goes on this calculation with a growth of 21.5% and it contributes in GDP growth with 4.9%, this growth is too high, colombians are spending most our foreign currencies on no capital goods and few spending on capital goods, most of spending in capital goods are for mining and oil production which is need but they do not bring a seed for real development.
Table 2. Gross Domestic Product growth by spending component
2011
Component
|
Growth by component
|
Growth contribution to GDP
|
Private Consumption
|
6.5%
|
4.3%
|
Government Consumption
|
2.6%
|
0.4%
|
Investment
|
17.2%
|
4.2%
|
Exports
|
11.4%
|
1.8%
|
Imports
|
21.5%
|
-4.9%
|
GDP
|
5.9%
|
5.9%
|
