At the same time, the organization calls for the implementation of a reform agenda to ensure long-term economic growth.
The Organisation for Economic Co-operation and Development (OECD) has revised its forecast for Colombia's Gross Domestic Product (GDP) growth for this year upwards by six-tenths, from 1.2% to 1.8%, while it has lowered its forecast for 2025 by five-tenths, from 3.3% to 2.8%.
According to the organization in the new edition of the study on Colombia's economic outlook, published on Tuesday, this growth figure reflects the persistent impacts of restrictive macroeconomic policies and modest global growth.
"Colombia's economic activity has slowed after one of the strongest recoveries among OECD countries following the recession caused by the pandemic," explained the institution chaired by Mathias Cormann.
The higher growth expected for 2025 is due to the expected effect of policy easing and improved global economic conditions. However, investment is expected to remain weak.
The OECD has thus pointed to the need to implement a comprehensive reform agenda to boost long-term growth, with a "prudent" fiscal policy that will unlock the country's potential and attract greater investment.
"Colombia needs to revitalise investment to boost productivity and unlock its potential for strong and sustainable long-term growth," said OECD chief economist Alvaro Santos Pereira.
REDUCE INFORMALITY
Reducing business informality and the regulatory burden could boost private investment and improve Colombia's growth potential. Achieving this requires comprehensive reforms, including lowering the corporate tax rate, facilitating access to affordable credit, and fostering a stable and predictable policy environment.
Other measures to reduce business and labour informality could include reducing social security contributions for lower-income workers or better enforcing labour and tax laws.
On the other hand, the OECD has urged the Government to continue fiscal consolidation and comply with the fiscal rule to help reduce the financing costs of public debt, thus supporting the sustainability of public debt.
"Improving spending efficiency and implementing comprehensive, gradual and well-communicated tax reform would create fiscal space for social and productive investments," the OECD argued.
Finally, Colombia’s abundant natural resources and renewable energy potential position it to lead the global transition to sustainability. However, substantial reforms are needed.
Accelerating renewable energy generation, supported by a stable regulatory framework, and redoubling efforts to adapt to climate change are key to building a climate-resilient economy, the OECD said.
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