Colombia’s Treasury Ministry revealed May 4 that its own “Fiscal Rule Advisory Committee” of economic analysts now fears that the Colombian economy could shrink by 5.5% this year because of the Coronavirus crisis.

The “CCRF” Committee (“Comité Consultivo de la Regla Fiscal”) just undertook a new sensitivity analysis of the behavior of fiscal variables under different scenarios of economic growth, according to the Ministry announcement.

Rationale: “Unusual uncertainty that prevails in the world macroeconomic outlook,” according to the official CCRF report (see: http://www.urf.gov.co/webcenter/ShowProperty?nodeId=%2FConexionContent%2FWCC_CLUSTER-129797%2F%2FidcPrimaryFile&revision=latestreleased).

“According to the most likely economic growth scenario estimated by the government, productive activity would contract 5.5% in 2020. This figure is consistent with a fiscal deficit target of 6.1% of GDP, given the Committee's decision to support the activation of the countercyclical spending clause . . .

“The deterioration of the fiscal balance [in 2020] compared to 2019 is due both to the extraordinary spending needs derived from the health crisis and economic emergency, and to the significant reduction projected in the tax collection.

“The difficult liquidity situation facing the business sector today is expected to deepen the negative effect that low economic growth usually generates on government revenues.

“Likewise, the Committee emphasizes the importance of the government presenting a path of fiscal adjustment for the coming years, which guarantees the sustainability of public finances.

“The strategy must integrate elements of rationalization and targeting of subsidies, the dismantling of countercyclical spending and measures aimed at increasing government revenues,” the report concludes.