During President Petro’s inaugural year in office, Colombia grappled with near-stagnant economic growth, as the Gross Domestic Product (GDP) recorded a meager 0.6% increase in 2023, marking the slowest expansion since 1999. This economic downturn is seen as a critical sign that President Petro’s policy initiatives, his “total peace” agenda, and crippling tax reform have had a detrimental impact on the nation’s financial landscape. All this without considering congressional approval to a health reform, and profound overhaul to the nation’s pension scheme.
The Administrative Department of Statistics (DANE) presented the GDP results for both the fourth quarter and the entire year on Thursday, December 15, revealing a worrisome trend. The fourth-quarter figure of 2023 put growth at 0.3%, and pushing Colombia towards a “technical recession”. Piedad Urdinola, director of DANE, highlighted the grim reality by stating that the total year data of 0.6% growth marked a sharp decline from the 7.3% achieved in 2022, and during former President Iván Duque’s final year in office.
The weak economic indicators are widely viewed as a consequence of President Petro’s socialist agenda, which has faced criticism for its potential adverse effects on business confidence and investment. Already struggling sectors in the post-Covid pandemic, including Industry, Commerce, and Construction, were unable to recover from a series of poor results, and raising real concerns about the effectiveness of the current administration’s economic strategies.
Throughout 2023, Construction (-4.2%), Manufacturing (-3.5%), and Commerce (-2.8%) were the most affected sectors, displaying persistent declines that mirrored their prolonged poor performance. The arts sector, entertainment, and recreation, along with other service industries, experienced growth of 7.0%, but contribute only 0.2% points to the GDP’s annual variation.
Jonathan Malagón, president of the country’s banking association (Asobancaria), and former Housing Minister under President Iván Duque, acknowledged the economic challenges in an interview with Portfolio, and emphasized the need for intensified efforts to bolster the economic recovery process. He pointed out that the 0.6% growth in 2023 fell significantly below the historical average, hinting at the potential impact of the policy decisions made during President Petro’s first year.
The National Federation of Commerce (Fenalco) also echoed concerns, with president Jaime Cabal, calling for urgent actions by the national government to prevent a recession. Cabal emphasized that the current economic scenario cannot continue, expressing reservations about the deterioration of the economy and business confidence undermined by President Petro. Cabal specifically urged a response to the business sector’s proposed shock plan, which has yet to receive acknowledgment from the leftist administration. “Under this scenario, we cannot continue sponsoring the deterioration of the economy and business confidence,” he said.
As the government plans to navigate the turbulent economic challenges of 2024, Finance Minister Bonilla maintains optimism on achieving a 1.5% growth based on aligning public and private investment. “We are aiming for a growth at 1.5% this year. To achieve this, we need to align both public and private investment and have the Central Bank continue sending a positive message to the country in terms of reducing interest rates. The fall in inflation is contributing to make that possible,” noted Bonilla.
The Central Bank’s independence is also considered crucial beyond the current blame game and finger pointing over Petro’s social media narratives and gaslighting the domestic agenda with talk of an “institutional coup” against his presidency. As skepticism surrounding Petro’s economic policies run deep, the impact on the nation’s financial health remains a significant factor in the ongoing economic debate, and one that will become more polarized should Colombia officially enter recession with the results of the second quarter.
