An bold tax reform to finance social spending and maintain the financial system rising are a few of the challenges it should face Gustavo Petro as president to reply to the excessive expectations created by his election among the many poorest.
Petro will take this Sunday with the promise to make political, financial and social transformations that the nation requires, for which it must face not solely the standard issues of a restricted finances, but additionally a fragile worldwide scenario on account of the risk of a global recession.
“Undoubtedly the largest drawback is the finances subject, which is severe and deserves to be acknowledged by the general public and to know easy methods to appropriate it,” Petro mentioned final week. His transition crew has denounced the outgoing authorities, led by the president Ivan Dukaspared no expense within the final half.
What Minister of Finance, Petro appointed the celebrated economist José Antonio Ocampoa person with expertise in state affairs – he already held that portfolio between 1996 and 1997 – and in worldwide organizations such because the Financial Fee for Latin America and the Caribbean (ECLAC), who must make the mandatory changes within the financial system.
Preparations on the Plaza de Bolívar in Bogota, the place the inauguration ceremony of Gustavo Petro will happen. Photograph. EFE
The struggle in opposition to poverty
In response to a report by ECLAC final June, the consequences of the warfare in Ukraine, particularly the rise in power and meals costs, will improve poverty in Latin America and Colombia won’t be an exception as this indicator will go from 33.6% in 2021 to 38% in 2022, even reaching 39.2% relying on how inflation behaves.
“Poverty elevated in 2019, earlier than Covid, and fell very barely in 2021. We nonetheless have increased ranges of poverty than we had at first of the present administration,” Ocampo mentioned at a latest briefing.
In response to the Nationwide Administrative Division of Statistics (DANE), 19.6 million folks had been in a state of financial poverty within the nation final 12 months, which, in response to Ocampo, exhibits that there have been “nearly 4 million poorer folks in 2021 than these we … there was earlier than the disaster”.
“The difficulty of poverty and problems with starvation which have been recognized in some components ought to be precedence points for the following authorities,” mentioned the appointed minister.
Ocampo could have amongst his duties the presentation of an bold tax reform With which Petro goals to extend the nation’s assets, which by 2023 could have a finances of 391.four billion pesos (about 91,190 million at the moment), in response to the venture offered every week in the past.
The reform, which is able to give attention to higher-income people and avoiders, goals to boost near 50 billion pesos a 12 months (about $11.5 billion at the moment).
On this regard, the chief economist at BBVA Analysis, Alejandro Reyes, considers that “the reform has political area to go” in Congress, the place Petro has managed to build some majoritieshowever believes that “it won’t be simple” to make it to the specified dimension as a result of “it could severely inhibit the personal sector and trigger a extra pronounced slowdown of the financial system.”
The outgoing president of Colombia, Iván Duque, and his successor, Gustavo Petro, whom he adorned on the Authorities Home this Friday. Photograph. AFP
“Within the historical past of Colombia, the largest reform didn’t exceed 1.5% of the present GDP of the gathering, and right here we’re speaking about nearly 5 factors of GDP,” Reyes informed the EFE information company, including that ” we’ve got to be a bit of cautious on this sense” and make “a gradual reform that clearly barely improves the fiscal place of the nation.
inflation and unemployment
Past income progress, the federal government additionally has different short-term challenges within the financial area, similar to peak inflationa worldwide phenomenon, which within the case of Colombia, measured year-on-year to June, was 9.67%, or the excessive unemployment fee on account of the ban brought on by the pandemic disaster.
“In social issues, the worst impact of the disaster was initially the drop in employment, six million jobs had been misplaced,” mentioned the longer term Minister of Finance, who emphasised that the restoration has been “gradual, however optimistic and it may be mentioned that. At present we’ve got roughly the identical degree of employment earlier than the disaster”.
In response to DANE, unemployment in June was 11.three%, nearly half of the 20% reached on the worst of the disaster, however an element to be resolved is the excessive variety of residents who haven’t but returned to the labor market, in response to Reyes . .
“The variety of inactive folks in Colombia remains to be two million above what we had earlier than the pandemic, which is a monstrous determine; this will probably be an enormous problem for the brand new authorities,” added the BBVA Analysis analyst.
Development and deficit
One other problem on this space will probably be to take care of financial progress, which in 2021 was 10.6%, from a low base of comparability, which was that of 2020, the worst 12 months of the pandemic and whichall the things factors to a slowdown within the second half of this 12 months.
“We’re forecasting an financial system that can develop 6.eight% this 12 months and a pair of% subsequent 12 months,” BBVA Analysis’s chief economist for Colombia, Juana Téllez, mentioned lately when presenting the financial forecasts.
Reyes provides that the opposite challenges Petro will face will probably be “extra structural,” similar to “a excessive present account deficit (5.7% of GDP in 2021) coupled with a excessive fiscal deficit (7.1%, in response to preliminary figures for 2021)., a mix of imbalances that places us in a weak scenario within the face of world actions and that limits our progress capability”.