Potential Growth in Colombia

Abstract

This paper uses a multivariate filter and a production function to project potential growth inColombia, modeling in detail the impact of low oil prices on investment. The framework alsocaptures the impact of current and planned policies on potential growth, including the peaceagreement with the FARC, the tax reform, and 4G infrastructure projects. The analysissuggests the growth acceleration of the 2000s is unlikely to repeat itself in a world of loweroil prices. Potential growth is likely to moderate to a range of 2.8 to 4.1 percent. The 4Ginfrastructure projects and the tax reform will increase investment, partly offsetting the sharpdecline in oil investment. Improvements in productivity are essential to lift potential growth,as the large increases in the labor force observed in the last 15 years are unlikely to continue.

Keywords: Western Hemisphere, Colombia, Potential output, Potential output; Colombia; Investment, Investment, General, Financial Markets and the Macroeconomy

JEL Classification: E10, E20, E32, E44