Covid impact: Economic problems in Colombia
Colombia has one of the largest and wealthiest economies in Latin America and the Caribbean (LAC). Along with Indian economy, Colombia has seen a massive rise last decade. Ranking as the fourth-largest economy in LAC and the thirty-first largest globally, Colombia has a standing in the international community as an up-and-coming developing nation.
This can be seen in its steadily growing GDP, although it has recently taken a substantial hit during the COVID-19 pandemic. Current projections indicate that Colombia’s GDP may drop between 5.5 to 7.8% by the end of 2020 due mainly to the economic impact of lockdown and social distancing measures enacted to combat the pandemic.
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Unique socioeconomic characteristics
An interesting thing to note about Colombia is its unique socioeconomic characteristics and how it was affected by the pandemic. Unlike many other countries in the region, or internationally for that matter, Colombia experienced a surprisingly slow contagion pace. This means the COVID-19 virus has spread slower than expected for a country of Colombia’s size and economic standing. For example, it took 100 days for Colombia to reach 100 daily cases per million people, yet more developed nations like Spain reached this figure in just 20 days. This is a testament to Colombia’s citizens and their adherence to the government’s strict pandemic regulations. However, Colombia’s low international travel numbers and other such variables may also be positively influenced.
Watch a very interesting video about the economic issues that Colombia may have after pandemic
Covid pandemic affected economy
The slow spread of COVID-19 was an excellent achievement by the country. However, this did not prevent the pandemic from affecting the economy. The pandemic regulations implemented by the government meant that many businesses experienced a reduction in their operations or a halt to their operations altogether. Some establishments, like entertainment venues or restaurants, were forced to shut down. This meant that many were left unemployed or with a dramatically reduced income level. Naturally, this reduced average household expenditures and declined economic activity throughout the nation. Things became critical to the economy when unemployment reached 21.4% in May of 2020. This was difficult for the government to handle for several reasons.
High number of informal workers
On top of being a developing country, Colombia also has an exceptionally high number of informal workers, accounting for 46% of its workforce. The everyday worker is a general term applied to workers in any sector employed in unregistered businesses or simply those who don’t pay income tax. This means a substantial portion of the population could not access social services or benefits officially offered by the government, much of which could have helped numerous households. Instead, one of the few solutions available to Colombia was reopening these businesses by lifting some COVID-19 regulations early.
This has caused the spread of the COVID-19 virus to start moving more quickly throughout the population and provided little aid to struggling businesses. At this point, it seems likely that Colombia will be battling this pandemic for some time, at least until an alternative such vaccine becomes available. Although the lasting effects of this pandemic are still unknown, Colombia certainly has a long way to go before its economy recovers to pre-pandemic levels.
Watch interesting TED Talk from Robert Neuwirth. By his predictions, informal economy will be huge this decade. It means that economy of Colombia could be big surprise in LATAM countries.