Colombia’s notoriously optimistic finance minister said Sunday that his country is facing “the worst year in the economic history of the country.”
In an interview with newspaper El Espectador, Finance Minister Alberto Carrasquilla said that he had lowered his economic growth projection from +3.7% to between -1.5% and -2%.
This would be the first contraction of the economy since the country’s financial crisis in 1999 that triggered the bankruptcy of multiple banks and mass home evictions.
This will be one of the worst years, if not the worst, in our economic history.
Finance Minister Alberto Carrasquilla
Blow after blow after shot in the foot
Before the coronavirus pandemic became an issue, Carrasquilla was already confronted with another major blow, a major reduction in global oil prices as a consequence of an oil war between Russia and Saudi Arabia.
On top of that, the finance minister last year gave a major tax discount to corporations against the advice of economists who warned this alone would lead to $2.3 billion losses in tax revenue.
The current quarantine costs approximately $516 million a day. The economic contraction expected by Carrasquilla would lead to the loss of $2.6 billion in tax revenue.
The finance minister told the newspaper he was considering another tax reform to recover at least the expected tax revenue losses.
Carrasquilla said last week he also reached out to the International Monetary Fund (IMF) to obtain an $11 billion loan to restart the economy and fill the gaping holes in his budget.
This means much more debt and it is a debt that we have to pay once we get over this tragedy.
Finance Minister Alberto Carrasquilla
Only insecurity ahead
While certain the country is facing a crisis year, the finance minister said he couldn’t guess how long this crisis will last as the entire world economy has gone into recession.
No one in the world is in a position to estimate what will happen next, but we have prepared ourselves to face strong tensions in the financial system.
Finance Minister Alberto Carrasquilla
Carrasquilla stressed that there is only so much the government and the central bank can do as the crisis is global and Colombia will have to adapt to to developments in the global economy.
