Since March 24, 2020, when a mandatory and almost total lockdown began in the country, Colombia began to be submerged in an endless number of complex and hard-to-solve health, social, political, and economic situations, while one of the most worrying diseases of all time still has no clear solution. The forecasts that accompanied Iván Duque and his cabinet with the arrival of 2020 changed overnight. The arrival of Covid-19 to national territory convulsed everything and, amidst attempts to organize and control the situation, improvisation also had to take the reins.
An absolute lockdown was maintained in Colombia for almost two months: empty hospitals, creation of temporary hospital centers, suspension of classes, and the paralysis of almost all in-person operations in the country. The measures undoubtedly helped to keep the spread of the novel Coronavirus suppressed, but, as the authorities themselves had stated, “hunger is also a public health problem,” so it was necessary to change the strategy.
The country endured lockdown for no more than two months. Construction and manufacturing were two of the major sectors that began to reactivate, with biosecurity guidelines established by the Ministry of Health and Social Protection, to maintain – as much as possible – control over infections.
Immediately, the numbers began to increase. Every day, the number of positive Covid-19 cases and deaths started to grow. This was not only due to the economic reactivation that had occurred up to that point but also because of the expanded diagnostic capacity the national government managed to establish.
The quarantine, in all the forms it has been established, will end on August 31st. From September 1st, everything will return to “normal.” Only people with Covid-19, their close contacts, or those suspected of being infected will need to remain in confinement. Each sector, with its guidelines and new operating rules, will be able to reactivate.
According to projections by the International Monetary Fund (IMF), Colombia’s economy is expected to contract by 7.81% year-on-year in 2020, which would mark the first recession since 1999, when the economy contracted by 4.21% year-on-year. The IMF notes that the dynamism of the Colombian economy and the rapid economic policy responses to the pandemic suggest that the decline in economic activity will be less severe than in other Latin American and Caribbean countries, which collectively are projected to see a decline of -9.41% this year. Additionally, the IMF believes that, if the health situation stabilizes, Colombia could lead the economic recovery in the region, with growth of 4.01% in the third quarter of 2021, above the expected average for the region (3.71%).
In its April Monetary Policy Report, the Central Bank of Colombia projected that the country’s growth would range between -2.01% and -7.01% in 2020. In a scenario of gradual easing of social distancing measures and restoration of confidence, a gradual economic recovery can be expected in the second half of the year, which should continue into 2021.
According to Procolombia, in June, the Fiscal Rule Advisory Committee unanimously approved the suspension of the fiscal rule in the country for 2020 and 2021, taking into account the magnitude of the macroeconomic shock currently experienced by the local and international economy and the need for greater fiscal flexibility. In this regard, the national government commits to including in the Medium-Term Fiscal Framework the fundamental guidelines of the fiscal strategy required over the coming years to normalize fiscal accounts.
For Olga Lucía Acosta, an expert from the Economic Commission for Latin America (ECLAC) office, the Colombian reality is not far from that of developed countries like Spain or Italy. The pandemic overwhelmed capacities, and almost no country, without universalizing the situation, was prepared to handle a health contingency of such magnitude.
ECLAC projections indicate that extreme poverty would rise from 10.1% in 2019 to 14.31% in 2020, on average, and overall poverty from 29.1% to 34.1%, an increase of nearly 5 percentage points. “We are still doing slightly better than the Latin American average, but greater inequality in income distribution is projected regardless.”.
But efforts are beginning to show in combating the situations that are going to arise. In Acosta's words, the final impact will depend on the mitigation and containment measures that each country proposes:
- Duration of the health crisis: social distancing measures.
- Social impacts through employment on household income.
- Impact on productive capacity through its effects on SMEs, large companies, and productivity.
- Fiscal impacts, deficit, and debt due to lower economic activity.
Given the scenario, ECLAC proposes five types of measures:
- Monetary transfers: new programs and extension of existing measures (advance payments, increased amounts, expanded coverage).
- In-kind transfers: food, medicine, masks, and hygiene products.
- Provision of basic services: suspension or exemption from payment of water, electricity, gas, telephone, internet bills.
- Social protection for formal workers: exposure reduction (teleworking), income and job protection, unemployment insurance, leave, and dismissal prohibition.
- Other direct support for individuals and families: tax relief, easier payment of loans and mortgages, price controls.
Without a doubt, a daunting challenge awaits President Iván Duque in the final years of his term. The economic avalanche left by COVID-19, coupled with new attempts by subversive forces to destabilize the country, compel the national leader to establish concrete and decisive strategies, for which the cooperation of the most stable sectors of the country is indispensable.