Setting the field for a faster growing economy: Colombia's way forward to foster entrepreneurship and increase productivity. Alberto Carrasquilla - Minister of Finance, Colombia

1. COLOMBIA
INSIDE OUT
2019

3. Setting the Stage for a
Faster Growing Economy…
Colombia´s Way Forward
Alberto Carrasquilla
Ministry of Finance and Public Credit
June 2019

4. 1. Economic Growth Outlook
2. Setting the Way Forward…
Agenda

5. Economic Growth Outlook

6. *Forecasts estimates
Source: DANE; Ministry of Finance calculations
Where Economic Growth Will Come From:
Share
2018
2017 2018 2019*
GDP 100,0 1,4 2,6 3,6
Total Consumption (I) 83,7 2,4 4,0 4,3
Private Consumption 68,5 2,1 3,6 4,3
Public Consumption 15,2 3,8 5,6 4,2
Investment (II) 21,4 -3,2 3,5 6,3
Gross fixed capital
formation
21,2 1,9 1,5 5,0
Exports 15,9 2,5 3,9 4,0
Imports 20,8 1,2 7,9 9,5
Domestic Demand (I+II) 104,9 1,2 3,9 4,3
Share
2018
2017 2018 2019*
GDP 100,0 1,4 2,6 3,6
Agriculture and
Manufacturing
21,3 0,9 2,0 3,1
Mining and Energy 5,1 -5,7 -0,2 3,4
Construction 6,9 -2,0 0,8 -0,1
Financial Services 4,5 5,4 3,3 3,2
Other Services and Taxes 62,0 2,1 3,3 4,0
On the Supply Side (%) On the Demand Side (%)

7. Economic Growth Forecasts:
Forecasts for Colombia (%) Our Neighbors (%)
-1,2
1,4
1,6
2,1
3,3 3,4
3,6
3,9
Argentina
LATAM
México
Brasil
Mundo
Chile
Colombia*
Perú
3,6
3,5 3,5
3,6
3,4
Ministry of
Finance
Central Bank
of Colombia
IMF World Bank OECD
Fuente: Latin Consensus Forecast – May 2019, Global Economic Prospects; Central Bank of Colombia, OECD and
World Economic Outlook

8. *Forecasts estimates made every March (except for 2019 forecast, made in Dec-18)
Source: Central Bank’s economic expectations survey, World Economic Outlook (FMI) – April 2019. Ministry of Finance calculations
Observed (t) vs. Forecasted (t-1)*
3,6
0,3
1,3
2,3
3,3
4,3
5,3
6,3
7,3
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Average
Minimum
Real GDP growth
Ministry of
Finance Forecast
Economic Recovery is Always Underestimated by
Analysts…

9. Setting the Way Forward…

10. Source: Ministry of Finance of Colombia
A. Short Term Numbers
2018 2019 2018 2019 Difference
Total Revenue 149.292 172.570 15,3 16,5 1,2
Tax Revenue 135.187 148.496 13,9 14,3 0,4
Other 14.105 24.075 1,4 2,3 0,8
Total Expenditure 179.608 197.505 18,4 18,9 0,5
Interest 27.474 31.104 2,8 3,0 0,1
Subnational Transfers (SGP) 36.612 41.037 3,8 3,9 0,2
Pensions 33.948 36.234 3,5 3,5 0,0
Other 81.574 89.130 8,4 8,5 0,2
Primary Balance -2.842 6.169 -0,3 0,6 0,9
Total Balance -30.316 -24.935 -3,1 -2,4 0,7
CONCEPT
Billion COP % of GDP

11. Source: Ministry of Finance
f: Forecast
*Total fiscal balance of the Central Government, excluding interest payments
-1,1
-0,1
0,2
0,0
-0,2
-0,5
-1,1
-0,8
-0,3
0,6
0,7
1,0
1,0 1,02010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2019: Highest primary surplus since
2008 and the first since 2012
Central Government Primary Balance*
(% of GDP)
B. The Medium Term Strategy

12. Central Government Debt
(% of GDP)
12
38,8
36,7
34,6
37,1
40,2
45,0
46,0
47,0
50,6
51,5
49,9
48,3
46,9
45,4
44,1
42,9
41,6
40,3
39,1
38,2
37,2
37,4
34,8
33,6
34,6
37,1
42,1
43,5
44,5
48,0
50,2
48,9
47,4
45,9
44,4
43,1
41,9
40,7
39,4
38,2
37,2
36,3
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Gross Debt Net Debt
Source: Ministry of Finance
C. Fiscal Sustainability

13. From the Expenditure Side
Source: Ministry of Finance
ShortTerm
Austerity Plan
Balance Sheet
Approach
0.5% of GDP
(Total Over 5
Years)
Savings: 0.7% of
GDP over 5
years
Refocusing
Subsidies
9% of GDP are
currently spent
Efficiency Gains from
Treasury Management
Savings: 1.0% of
GDP over 5
years

14. From the Revenue Side
• The higher economic growth due to
the Financing Law in the following years
will increase tax revenues in up to 0.7
percentage points of GDP.
• Better use of data plus full
implementation of electronic
invoicing will decrease tax evasion
from 30% to 23%, increasing tax
revenue in 1.3 percentage points of
GDP.
• Higher penalties for evasion, and
the technological and personnel
strengthening of DIAN will
reduce evasion and informality.
Estimated Tax Evasion Rates (%)
VAT Income Tax
2012 31% 40%
2013 29% 38%
2014 22% 37%
2015 19% 26%
Total decrease -12 pp -14 pp
Mexico
Year
For Mexican estimations of tax evasion and the impact of electronic invoicing, sources are UDLAP, ITESM and SAT (Tax administration)
Similar results are found in Brazil. The IBPT finds that due to electronic invoicing, tax evasion dropped from 32% to 25%
Source: Ministry of Finance calculations.
1
4
Year Colombia -Total
2019 30%
2020 27%
2021 26%
2022 23%
Total decrease - 7pp

15. Finally, There Are Buffers…

16. Lets Talk About Reserves
0
63
125
188
250
2010 2011 2012 2013 2014 2015 2016 2017 2018
Internal ALA* / Internal amortizations
External ALA / External amortizations
Total ALA / Amortizations
* ALA corresponds to Central Government’s deposits in Central Bank, and National treasury external assets.
Source: Ministry of Finance
Central Government Available Liquid Assets* / Amortizations

17. As to the banking system, reserves are also very strong
Source: Financial Superintendence of Colombia.
• There are $401 billions in insurable deposits and $78,1 billions in insured deposits.
• Total reserves represent 4,8% of the total insurable deposits.
12,5
7 6,8
4,1
Total reserves
19,3 Trll
0
5
10
15
20
25
1 largest bank 2 largest bank 3 largest bank 4 largest bank
COPtrillions
Capital (last month) Capital needed to mantein solvency level at 9%
20,5%
34,5% 37,0%
40,6%
77,6%
84,6%
108,8%
119,4%
0%
20%
40%
60%
80%
100%
120%
140%
0
10
20
30
40
50
60
70
80
90
100
1 2 3 4 5 6 7 8
COPtrillions
largest bank
Insurable deposits Fogafin reserves/Insurable deposits (%)
Insurable deposits includes: deposits in current account, simple deposits, term deposit certificates, savings deposits, special savings accounts , mortgages
bonds, special deposits, revenue banking services and electronic deposit accounts.
Insured deposits correspond to insurable deposits whose amount is below $20 million (before April 2017) or $50 million (after April 2017).
1

18. Conclusions:
1. The Colombian story is about private sector led investment,
supported by significant adjustments of incentives.
2. After a very difficult few years, recovery is under way.
3. The fiscal situation is challenging. The government has designed
and is implementing a comprehensive set of initiatives that will
ensure sustainability.

19. Thank youA l b e r t o C a r r a s q u i l l a