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- GDP (PPP):
- $640.1 billion
- 4.6% growth
- 4.8% 5-year compound annual growth
- $13,430 per capita
- Inflation (CPI):
- FDI Inflow:
Colombia’s economic fundamentals, including macroeconomic stability and openness to global trade and finance, remain relatively strong. The economy has expanded by an average of around 5 percent annually over the past five years. Recent reforms have focused on improving regulation and fostering a stronger private sector.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 70.8 (down 0.9 point)
- Economic Freedom Status: Mostly Free
- Global Ranking: 33rd
- Regional Ranking: 3rd in the South and Central America/Caribbean Region
- Notable Successes: Open Markets and Management of Public Finance
- Concerns: Property Rights, Corruption, and Labor Freedom
- Overall Score Change Since 2012: +2.8
Management of public finance is relatively prudent, and public debt is under control. A strong fiscal climate has been reaffirmed by a boost in bond ratings. However, anti-corruption laws have had little impact, and the judicial system remains vulnerable to political interference. Deeper institutional reforms are needed.
President Juan Manuel Santos, reelected in 2014, has made peace with the Revolutionary Armed Forces of Colombia (FARC) his top priority, but negotiations have dragged on for more than four years. Santos has promised that there will be no impunity for the guerrillas, but FARC leaders have stated that they will not spend a day in jail. Santos also must raise the revenues to pay for any settlement. Colombia’s economy is South America’s third largest, behind Brazil and Argentina. It depends heavily on exports of petroleum, coffee, and cut flowers and has been affected by the drop in global commodity prices and tax increases introduced by Santos. Colombia is a founding member of the Pacific Alliance trade pact. Inflation remains low, and the poverty rate has decreased in recent years.
Drug-trafficking and the violence and corruption that it engenders continue to erode institutions. Corruption occurs at multiple levels of public administration. The courts have demonstrated some independence from the executive in recent years, but the justice system remains compromised by corruption and extortion. Colombia improved its ranking for ease of property registration in the World Bank’s 2015 Doing Business report.
The top individual income tax rate is 33 percent, and the top corporate tax rate is 25 percent. Other taxes include a value-added tax and a financial transactions tax. The overall tax burden equals 16.5 percent of total domestic income. Government spending has stabilized at about 29.2 percent of total domestic output, and public debt remains below 40 percent of GDP.
Business procedures have been streamlined. With no minimum capital required, the cost of launching a business equals less than 10 percent of average annual income. Reforms are needed to improve labor flexibility and lower non-wage costs. In 2015, the government ended a middle-class mortgage subsidy program that had been aimed at boosting home construction but increased subsidies for low-income and middle-income urban housing.
Colombia’s average tariff rate is 4.5 percent. Restrictions affect some service-sector industries. Foreign and domestic investors are generally treated equally under the law. State-owned enterprises are active in the energy sector. Private institutions dominate the growing and well-capitalized financial sector. The number of non-performing loans has declined, and the financial transaction tax is scheduled to be reduced.