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OECD ECONOMIC SURVEY OF COLOMBIA 2017 Boosting inclusive growth 25 May 2017, Bogota www.oecd.org/eco/surveys/economic-survey-colombia.htm @OECDeconomy @OECD Main findings The economy has been resilient to the fall in commodity prices Raising productivity and making growth more inclusive are key to lifting living standards A solid macroeconomic policy framework sustained growth The landmark 2016 tax reform will boost investment and reduce the dependence on oil revenues Reforms to strengthen the business environment and the quality of education, to reduce informality and increase women’s work opportunities would raise productivity and reduce income disparities Living standards have improved Source: World Bank, World Development Indicators database. Poverty has declined Source: DANE, Encuesta Continua de Hogares (2002-2005) y Gran Encuesta Integrada de Hogares (2008-2015). Growth has been robust Source: OECD Productivity Statistics database. The shock to the terms of trade was large Index, 2007=100 140 LAC-4 Index, 2007=100 140 Colombia 135 135 130 130 125 125 120 120 115 115 110 110 105 105 100 100 95 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Note: LAC-4 refers to the unweighted average of values for Argentina, Brazil, Chile and Mexico. Series calculated as a 4-quarter centred moving average. Source: OECD Economics Department database. 95 The peso depreciated significantly Source: Banco de la República. Inflation is coming down Y-o-y % changes Y-o-y % changes 10 10 Inflation Core Inflation Inflation expectations 12-months forward 9 9 8 8 7 7 6 6 5 5 4 4 3 3 Inflation target range 2 1 0 2 1 2011 2012 2013 2014 2015 Source: OECD Economics Department database and Banco de la República. 2016 2017 0 The tax reform is a step in the right direction but more revenue is needed Statutory corporate income tax rates as of 2016 % % Note: *COL refers to 2017 and **COL refers to 2019. Source: OECD Tax database. COL* USA FRA BEL COL** ITA DEU MEX AUS JPN PRT LUX GRC NZL CAN ESP NOR NLD ISR AUT 0 KOR 0 CHL 5 SWE 5 SVK 10 DNK 10 CHE 15 GBR 15 TUR 20 ISL 20 FIN 25 EST 25 POL 30 HUN 30 CZE 35 SVN 35 LVA 40 IRL 40 Key recommendations Further improve macroeconomic resiliency • Raise more revenue in the medium term. • Approve the law awarding the financial superintendence regulatory powers over holding companies of financial conglomerates. Creating better quality jobs Informality is high 2013 or latest available year A. Employees % B. Self-employed % 90 90 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 CHL CHN BRA TUR CRI ZAF ARG COL MEX CRI MEX ZAF COL Note: Informality among employees is defined as the share of employees not contributing to the pension system. Informality among self-employed is defined as the share of self-employed who did not register their business. Source: OECD (2016). ARG 0 Self-employment is widespread Self-employment as a percentage of total employment, 2015 % % Note: Self-employment is defined as the employment of employers, workers who work for themselves, members of producers' co-operatives, and unpaid family workers. Source: OECD Economic Department Database and DANE, GEIH. COL GRC TUR ITA MEX KOR POL SVN NLD IRL BEL PRT CAN 0 OECD 0 NZL 5 CZE 5 GBR 10 ESP 10 SVK 15 AUT 15 ISR 20 LVA 20 ISL 25 FIN 25 JPN 30 FRA 30 DEU 35 AUS 35 LUX 40 HUN 40 CHE 45 EST 45 DNK 50 USA 50 NOR 55 SWE 55 Formal workers earn much higher wages 1500 1500 Formal workers Informal workers Average worker 1200 1200 900 900 600 600 300 300 0 2008 2009 2010 2011 2012 2013 Note: Formal workers are employees and self-employed people aged 15-64 who pay pension contributions. Source: OECD calculations based on GEIH of DANE. 0 Thousands Gross earnings in thousands of Colombian pesos, 2008-13 Tax reforms have helped the formal job creation Job creation at national level, annual changes Y-o-y % changes Informal 15 Formalisation and Job Creation Law Y-o-y % changes Formal 15 Abolition payroll taxes 10 10 5 5 0 0 Abolition health care contribution employers -5 2008 2009 2010 2011 2012 2013 2014 2015 Note: Formal job creation is defined as the year-to-year change in the number of workers (including employees and self-employed) contributing to the pension system. Source: OECD calculation based on GEIH data sourced from DANE. 2016 -5 The female employment to population ratio is below the OECD average Employment to population ratio of women aged 15-64, 2015 90 100 % 80 % 90 80 70 70 60 60 50 50 40 40 30 30 20 20 Source: OECD Labour Force Statistics database. TUR GRE MEX ITA CHL ESP KOR SVK COL POL IRL HUN BEL OECD FRA LUX SVN PRT CZE USA ISR JPN LTV AUS AUT FIN EST GBR NZL NLD CAN DEU DNK NOR 0 SWE 0 SWI 10 ISL 10 The gender gap is declining, but still high Male minus female employment to population ratios, in percentage points CHL % points MEX OECD COL 45 40 35 30 25 20 15 2001 2002 2003 2004 2005 2006 Source: OECD Labour Force Statistics database. 2007 2008 2009 2010 2011 2012 2013 2014 2015 Key recommendations to create better quality jobs • Further reduce taxes and fees on wages (non-wage labour costs). • Simplify procedures for company registration and the affiliation of workers to social security. • Ensure the provision of affordable, good-quality child care and affordable long-term care for elderly relatives or those with disabilities. • Expand access to and make greater use of active labourmarket programmes. Enhancing the quality of education is key Productivity is too low to support growth GDP per person employed, as percentage of the US, constant 2010 PPPs, 2015 % % 80 80 60 60 40 40 20 20 0 OECD EU CHL Source: OECD Productivity Statistics database. MEX BRA COL CHN IND 0 Income inequality remains high P90/P10 ratio, 2014 or latest available year Note: The P90/P10 ratio is the ratio of income of the 10% of people with highest income to that of the poorest 10%. Source: OECD (2016), OECD Employment Outlook. COL CRI CHL MEX USA TUR ISR EST ESP JPN GRC LVA PRT KOR ITA CAN NZL AUS GBR POL IRL DEU HUN CHE 0 LUX 0 FRA 2 BEL 2 NLD 4 AUT 4 SWE 6 SVN 6 FIN 8 SVK 8 CZE 10 NOR 10 ISL 12 DNK 12 Many students do not attain basic skills Student performance in sciences Mean science score in PISA, 2015 Source: OECD, PISA 2015 Database. IDN MEX CRI COL TUR URU ROM CHL SVK GRC ISL ISR ARG HUN ITA LVA LUX ESP CZE OECD FRA SWE AUT USA PRT NOR POL BEL DNK IRL CHE 300 NLD 300 DEU 350 GBR 350 AUS 400 SVN 400 NZL 450 KOR 450 HGK 500 FIN 500 CAN 550 JPN 550 EST 600 SGP 600 Improving skills will boost growth Long-run growth increase % points % points Note: "Long-run growth increase" refers to increase in annual growth rate (in percentage points) once the whole labour force has reached higher level of educational achievement. Source: OECD (2015), Universal Basic Skills: What Countries Stand to Gain, OECD Publishing. PER COL BRA ARG URY MNE CRI MEX CHL TUR ISR ROU SVK GRC ITA FRA SWE ISL LUX OE… HUN NZL ESP BEL NOR PRT AUT CZE 0.0 USA 0.0 DNK 0.2 GBR 0.2 AUS 0.4 SVN 0.4 IRL 0.6 DEU 0.6 NLD 0.8 CHE 0.8 POL 1.0 CAN 1.0 FIN 1.2 JPN 1.2 EST 1.4 KOR 1.4 Few students enrol in professional and technical degrees % 60 60 Percentage of students in secondary education enrolled in vocational programmes Percentage of students in tertiary education enrolled in technical programmes Source: UNESCO Institute for Statistics. Data for 2012. NLD AUT BEL CZE ITA SVN AUS CHE SVK FIN LUX NOR SWE PRT DNK CHL TUR ISL CHN EST FRA ISR IDN DEU ESP GRC CRI RUS IRL MEX HUN 0 OECD 0 THA 10 NZL 10 ARG 20 JPN 20 LAC 30 KOR 30 GBR 40 COL 40 BRA 50 ZAF 50 % Skill mismatches remain high Composition of labour supply and demand by level of education in Colombia % % 90 90 Supply Demand 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 High School Dimploma or less Technical degree Source: Colombian Atlas of Economic Complexity (Lora, 2015). Bachelor's degree Graduate degree 0 The education system could do more to promote social mobility Share of resilient students across OECD and LAC countries As a percentage of all students % 50 % 50 Note: A student is classified as resilient if he or she is in the bottom quarter of the PISA index of economic, social and cultural status in the country/economy of assessment and performs in the top quarter of students among all countries/economies, after accounting for socio-economic status. Source: OECD, PISA 2015 Database, Table I.6.7. PER BRA CRI COL MEX CHL URY ISR ARG ISL SVK HUN GRC LUX TUR CZE SWE AUT NOR ITA FRA BEL DNK 0 CHE 0 OECD 5 IRL 5 NZL 10 NLD 10 USA 15 AUS 15 POL 20 DEU 20 LVA 25 SVN 25 PRT 30 GBR 30 ESP 35 CAN 35 FIN 40 KOR 40 JPN 45 EST 45 Key recommendations to enhance the quality and outcomes of education • Provide more public support to skills training in regions lagging behind. • Establish a national curriculum for school education and professionalise teachers’ careers. • Provide more public support to increase enrolment rates of disadvantaged children in less developed regions. • Expand early childhood education. Boosting infrastructure and improving the business climate Public investment has increased % 5 % 5 Colombia OECD 4 4 3 3 2 2000 2001 2002 2003 2004 2005 2006 Source: OECD Economics Department database. 2007 2008 2009 2010 2011 2012 2013 2014 2015 2 The quality of infrastructure needs to be improved Index Ports Index 7 6 6 5 5 4 4 3 3 2 2 1 1 0 0 FIN BEL ESP DNK NZL USA NOR DEU GBR SWE CAN PRT JPN KOR IRL LVA FRA OECD CHL LUX AUS SVN CHE ZAF GRC CHN ITA TUR AUS MEX CZE IND IDN POL HUN ISR COL SVK CRI BRA 7 Note: Index scale 1-7, from lowest to highest quality. Source: World Economic Forum (2015). 4 4 3 3 2 2 1 1 0 0 Note: Index scale 0-6, from least to most stringent. Source: OECD, Product Market Regulation Database. Barriers to trade facilitation Diff. treatment of foreign suppl. Tariff barriers Barriers to entrepreneurship Barriers to FDI Barriers in network sectors Antitrust exemptions OECD average Legal barriers to entry Barriers in services sectors State Control Admin. burdens for sole propr. firms 5 Admin. burdens for corporations Comm. and simplification Licenses and permits system 6 Command and control regulation Index Price controls Involvement in business operation Governance of SOEs Direct control Gov't involvement in network sectors Scope of SOEs Business regulation remains restrictive Product market restrictiveness, 2013 Colombia Index 6 Barriers to trade and investment 5 Regulation is restrictive in the electricity, transport and railway sectors Road Index 6 Index 6 5 4 4 3 3 2 2 1 1 0 0 AUS CRI BRA CAN ISR PER CHE ARG AUT DNK FIN DEU IRL JPN LUX MEX NZL NOR SVK SWE GBR OECD HUN BEL CZE EST ISL KOR NLD POL PRT SVN ESP CHL GRC COL FRA TUR ITA 5 Note: Index scale 0-6, from least to most stringent. Source: OECD, Product Market Regulation Database. The court system is slow to resolve commercial disputes Days Time required to enforce a contract, 2014-15 Days 1600 1400 1400 1200 1200 1000 1000 800 800 600 600 400 400 200 200 0 NZL KOR NOR RUS LUX SWE JPN FIN MEX CHE AUS FRA HUN AUT DNK ISL USA EST PER DEU GBR CHN LVA IDN CHL BEL ESP NLD OECD PRT CAN TUR ECU ARG PRY VEN CZE IRL POL PAN SVK URY BRA CRI ISR ITA SVN COL IND GRC 1600 Source: World Bank, Doing Business Database, 2015. 0 Key recommendations to boost infrastructure investment and improve the business framework • Sustain the increase in public investment. • Finance more infrastructure programmes on a regional basis. • Implement the road infrastructure program (4G) and guarantee that Private-Public-Partnerships continue to have proper cost-benefit analysis. • Remove regulations on public ownership and vertical integration in electricity, vertical integration and market structure in rail. • Introduce a court or a division of a court dedicated solely to commercial cases and facilitate case management through electronic case management tools. For more information Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. www.oecd.org/eco/surveys/economic-survey-colombia.htm Follow us on twitter: OECD Economics OECD