Colombia improved her economic growth in the last semester of 2013 because of government realized that the first semester of 2013 showed low performance. Colombian central government decided to increase her spending in US$1.8 billion in July of 2013; this extra spending let improving the central government cycle, and keeping Colombian GDP on her upward path. Therefore, the GDP’s forecast improved for 2013 and 2014; it is expected that Colombia faces an annual GDP growth rate of 4.3% in 2013 and 5.2% in 2014. This good scenario will be enjoyed by the region and the World; it is expected that Latin America faces an annual GDP growth rate of 2.8% in 2013 and 3.4% in 2014; for the World this figures are 2.7% in 2013 and 3.6% in 2014. Although Colombia can improve her economic growth, there are big issues to sort out by local government that are the income distribution and high unemployment for young professionals such as engineers, chemistries, economists, architects and so.
Author: Humberto Bernal,
Economist,
e-mail: zhumber@gmail.com
Twitter: Humberto_Bernal
The Colombian economic growth in 2013 started with low values in the first semester of 2013, but it took off through the last semester; the first quarter, the Gross Domestic Product (GDP) showed an annual growth rate of 2.5%; on second quarter, this growth rate was 4.0%; on third quarter, this growth rate was 5.1%; and the last one, according to my forecast, can be 5.5%. Moreover, the annual GDP growth rate for 2013 can be between 3.9% and 4.7% with a punctual forecast of 4.3% according to my forecast. This improving in Colombian economy can be partially attached to contra-cycle government spending through whole year as figure 1 shows; therefore the results from this high government spending impacted the economic growth at the end of 2013. The central government spending for 2013 was US$100.3 billions (Col$185,525 billion), but it was increased in US$1.8 billions (Col$3,394 billions) at the beginning of July of 2013, so the total government spending was US$102.1 billions. This note deals with forecast for Colombian economic growth for 2013 and 2014; fortunately these forecasts go through upward path, but the income distribution is poor still and professional unemployment is getting worst.
Figure 1. Colombian central government spending cycle 1977q1 - 2013q3
(quarterly data)
Source: own calculation through Hodrick-Prescott filter Stata 12.1.
Colombian GDP growth forecasts
The Colombian GDP growth rate for 2013 and 2014 are forecasted under positive scenarios. The first forecast that this note deals is mine. According to time series model called Vector Error-Correction model where government spending, money supply, volume of crude oil , volume of coffee, USA GDP, China GDP, Germany GDP and many other variables were taken to get a proper forecast (see Data on Stata file and Do file). The results are shown in figure 2; the blue data is the Colombian GDP in 2005 prices no seasonally adjusted, and the red line is the Colombian GDP forecasted in 2005 prices. As one can see, the results fits quite well under eyeball and also under statistical tests. If one takes this data to calculate the annual GDP growth rate, the result is a GDP growth rate between 3.9% and 4.7% with a punctual forecast of 4.3% for 2013. In the last quarter of 2013, it is expected that the annual growth rate reaches 5.5%. This data can be taken to do the forecasts for 2014 also; for instance, the annual GDP growth rate for each quarters in 2014 are 5.3%, 5.1%, 5.0 and 5.4%, so it means good perspective for Colombian economy in 2014. Moreover, at the end of 2014 the annual GDP growth rate is forecasted in 5.2%.
Figure 2. Colombia GDP in 2005 prices 1977q1 - 2016q3
(quarterly data Col$ billions in 2005 prices, forecast from 2013q4)
Source: own calculation through time series model VEC Stata 12.1.
Other international and local agencies forecast moderate scenarios for Colombian economy as I did before taking into account the extra government expending. The Colombian GDP growth for international agencies such as International Monetary Found (IMF) is 3.7% for 2013; other international agencies such as ECLAC-UN, the Economist, World Bank forecast this growth in 4.0%, 4.2% and 3.9% respectively. Local agencies such as DNP, ANIF and Fedesarrollo forecast this growth in 4.5%, 3.8%, and 3.8% respectively as table 1 shows. Therefore, at the end the average of these forecasts is 4.0% with a standard deviation of 0.3% for 2013. This improvement in Colombian economy can be attached to increase of government spending after the second semester of 2013 in about US$1.8 billion, so it means government realized the poor economic growth in the first semester of 2013, and she decided to increase her spending through additional resources out of those agreed with Colombian Congress at the end of 2012.
Latin America and the World will improve their economic growth for 2014 also. According to these agencies shown on table 1, it is expected that Latin America faces an annual GDP growth rate of 2.8% in 2013 and 3.4% in 2014; moreover, the World annual GDP growth rate can be 2.7% in 2013 and 3.6% in 2014.
Table 1. World, Latin America and Colombia GDP growth rates forecasts for 2013 and 2014
Agency
|
World
|
Latin America
|
Colombia
|
World
|
Latin America
|
Colombia
|
Data of last publication
|
2013
|
2014
|
||||||
DNP (Colombia government)
|
4.5
|
June 2013
|
|||||
IMF
|
2.9
|
2.7
|
3.7
|
3.6
|
3.1
|
4.2
|
October 2013
|
The Economist
|
2.9
|
2.7
|
4.2
|
3.6
|
3.6
|
4.7
|
January 2014
|
Colombia Central Bank
|
4.0
|
3.0 - 5.0
|
November 2013
|
||||
ECLAC (UN)
|
2.6
|
4.0
|
3.2
|
4.5
|
December 2013
|
||
World Bank
|
2.2
|
3.3
|
3.9
|
3.9
|
4.2
|
June 2013
|
|
ANIF (Colombia private firm)
|
3.8
|
4.5
|
December 2013
|
||||
Fedesarrollo (Colombia private firm)
|
3.8
|
4.6
|
December 2013
|
||||
Euromonitor
|
2.9
|
2.8
|
3.9
|
3.7
|
3.3
|
4.4
|
January 2014
|
Humberto’s
|
4.3
|
5.2
|
January 2014
|
||||
Average
|
2.7
|
2.8
|
4.0
|
3.6
|
3.4
|
4.5
|
Sample
|
Standard Deviation
|
0.4
|
0.3
|
0.3
|
0.1
|
0.3
|
0.3
|
Sample
|
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