BOGOTA, Nov 13 (Reuters) – Colombia on Friday raised its fiscal deficit target for 2020 to 8.9% of gross domestic product (GDP) and said it expects the economy to contract 6.8% due to the impact of the coronavirus pandemic.
The government had previously sought to maintain its fiscal deficit at 8.2% for 2020.
The forecast economic contraction is greater than a previous estimate of 5.5%, and near the higher end of a projected range given on Thursday by Finance Vice-Minister Juan Pablo Zarate, who said the economy was expected to shrink by between 6% and 7% this year.
“This update, compared to what was forecast in June, is mainly due to the longer duration of the pandemic’s effects, which has led to unfavorable revisions to economic forecasts both nationally and internationally,” Colombia’s Fiscal Rule Advisory Committee said in a statement.
In June the committee unanimously agreed to suspend deficit limits until 2022 to give the government more space to meet the fiscal needs created by the pandemic.
For 2021 the government now expects the economy to grow 5%, with the fiscal deficit reaching 7.6% of GDP. Previous estimates saw economic growth for next year at 6.6%, with a deficit of 5.1%.
The new estimate is more closely aligned with forecasts from the central bank, which sees a contraction in 2020 of between 6.5% and 9%.
Latin America’s fourth-largest economy was semi-paralyzed by a quarantine that spanned from March to the end of August as part of efforts to control the spread of coronavirus, causing businesses to shutter and a sharp uptick in joblessness.
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