An Outlook of the Colombian Economy

Ministry of Finance and Public CreditJuly 2014

6.4

3.1

-6

-4

-2

0

2

4

6

8

10

I II III IV I II III IV I II III IV I II III IV I II III IV I II III I

2008 2009 2010 2011 2012 2013 2014

Colombia Rest of PA (PA Average without Colombia)

PIPE

Quarterly GDP (Annual % variation)

Strong recovery

Source: DANE

Economic Growth

During 1Q2014, Colombia had the highest growth

rate of the region…

Source: Statistics Institutes

6.4

4.8

2.6

1.9 1.8

1

3

5

7

Colombia Peru Chile Brazil Mexico

Economic Growth

1Q 2014 GDP Growth (Annual % variation)

… and the second highest in the world

Source: The Economist.*4Q2013.

7.7

6.46.0

5.44.8 4.8

4.2 4.1 4.0

2.8 2.6 2.5 2.2 2.1 2.0 1.9 1.9 1.8 1.8 1.7 1.7 1.6 1.5 1.4 1.4 1.10.7 0.7 0.6 0.5 0.2 0.2

-0.3-0.4-0.6-0.8-0.9-1.7-2.0-2.3

-2.7-2.8

-5.3

-8

-6

-4

-2

0

2

4

6

8

10

Chi

na

Col

ombi

a

Indo

nesi

a

Tha

iland

Per

u

Indi

a

Pak

ista

n*

Mal

asia

Sau

di A

rabi

a*

Hon

g K

ong

Chi

le

Aus

tral

ia

Egy

pt

Arg

entin

a*

Isra

el

Bra

zil

Sou

th A

fric

a

Uni

ted

Sta

tes

Mex

ico

Tai

wan

Sw

eden

Rus

sia

Sou

th K

orea

Tur

key

Can

ada

Sw

itzer

land

Aus

tria

*

Ven

ezue

la

Uni

ted

Kin

gdom

Pol

and

Sin

gapo

re

Japa

n

Ger

man

y

Fra

nce

Bel

gium

Den

mar

k

Hun

gary

Net

herla

nds

Spa

in

Italy

Nor

way

Cze

ch R

epub

lic

Gre

ece

Economic Growth

1Q 2014 GDP Growth – The Economist Sample (Annual % variation)

The agricultural and manufacturing sectors have shown an

important recovery

6.1

3.3

-8

-6

-4

-2

0

2

4

6

8

10

I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

GDP Agro GDP Manufacturing

PIPE

Economic Growth

Quarterly GDP (Annual % variation)

Source: DANE

Private consumption

The improvement in consumer confidence was

reflected in the behavior of private consumption

5.1

0.0

2.0

4.0

6.0

8.0

10.0

I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I

2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: DANE. DGPM-MHCP calculations.

Household consumption (Annual % variation)

Investment rate

Colombia keeps breaking its records for the

Investment Rate

23.2

14.2

18.8

23.924.5

27.4 27.5 27.6

30.4

12

15

18

21

24

27

30

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014-I

Investment Rate (% of GDP)

Source: DANE

31.2%30.4% 30.0%

24.2% 24.2% 24.1%

20.9% 20.7% 20.3%19.1%

12%

16%

20%

24%

28%

32%

India Colombia Perú Chile Turquía Indonesia Argentina Sur Africa México Brasil

Investment Rate 1Q2014 (% of GDP)

This high investment rate has contributed to

sustainable economic growth rates

5 Frágiles

Pacific Alliance

n

Investment rate

Source: Statistics Institutes

The dynamism of the economy has resulted in a

reduction in the unemployment rate

Unemployment rate

Unemployment Rate (National, Monthly)

Source: DANE

11.1%

10.7%9.7%

9.0%8.8%

7%

9%

11%

13%

15%

17%

Jan

Feb

Mar

Apr

May Jun

Jul

Aug

Sep Oct

Nov

Dec

max-min 2001-2009 2010 2011 2012 2013 2014

The reduction of the unemployment rate has been paired with an increase in formal employment

Formal Employment

Unemployment Rate vs. Formality Rate* (%)

Tax Reform

Source: DANE *Formal Employees/Total Employees

12.2

8.8

44.8

47.1

41

42

43

44

45

46

47

48

7

8

9

10

11

12

13

14

15

16

Jan

-07

May

-07

Sep

-07

Jan

-08

May

-08

Sep

-08

Jan

-09

May

-09

Sep

-09

Jan

-10

May

-10

Sep

-10

Jan

-11

May

-11

Sep

-11

Jan

-12

May

-12

Sep

-12

Jan

-13

May

-13

Sep

-13

Jan

-14

May

-14

Unemployment rate (National, monthly) Formality rate (13 areas, quarterly moving average, right axis)

Since the 2012 Tax Reform, formal employment has increased by 1’023,000 jobs*

Source: DANE. * (Quarterly Moving Average (QMA) Feb-Apr 14 vs. QMA Oct-Dec 12). **Social Security Affiliation

Number of formal jobs created since the Tax Reform – National(Quarterly moving average, thousands)

Formal Employment

-108 -83

42

314

450538 552

606650 660

602533

459

575

713

922

1,023

(200)

-

200

400

600

800

1,000

1,200

Cen

tral

Ban

k’s

Targ

et

Inflation

Inflation continues to stand within the Central Bank’s

target

2.79%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Jun-

02

Jun-

03

Jun-

04

Jun-

05

Jun-

06

Jun-

07

Jun-

08

Jun-

09

Jun-

10

Jun-

11

Jun-

12

Jun-

13

Jun-

14

Source: DANE

Reduction of the Fiscal Deficit

Consolidated Public Sector Balance (% of GDP)

26.128.329.2 29.2

-3.1-0.9

-5

1

7

13

19

25

31

2010 2013

Revenue Expenditure Fiscal Balance

Fast consolidation of the fiscal balance

Source: Ministry of Finance

Colombia has a sustainable fiscal deficit

Source: World Economic Outlook & Ministry of Finance.

Reduction of the Fiscal Deficit

5 Frágiles

Pacific Alliance

Consolidated Public Sector Balance - 2013 (% of GDP)

-0.8

0.7 0.9

2.2 2.3 2.33.0

3.5

4.9

8.5

-1.0

1.0

3.0

5.0

7.0

9.0

Peru Chile Colombia Indonesia Turkey Mexico Brazil Argentina SouthAfrica

India

Borrowing Costs

10 year USD rate (%)

3,63%2%

4%

6%

8%

10%

12%

14%

May

-02

May

-03

May

-04

May

-05

May

-06

May

-07

May

-08

May

-09

May

-10

May

-11

May

-12

May

-13

May

-14

Borrowing costs are the lowest in the last ten years

6.30%

5%

6%

7%

8%

9%

10%

11%

12%

13%

14%

15%

May

-04

May

-05

May

-06

May

-07

May

-08

May

-09

May

-10

May

-11

May

-12

May

-13

May

-14

10 year COP rate (%)

Source: Ministry of Finance

Source: Asobancaria- CIFIN

PIPE had a considerable impact on mortgage

interest rates

Reduction in interest rates

PIPE

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

14.0

Ma

r-1

0

Ma

y-1

0

Ju

l-1

0

Se

p-1

0

No

v-1

0

Ja

n-1

1

Ma

r-1

1

Ma

y-1

1

Ju

l-1

1

Se

p-1

1

No

v-1

1

Ja

n-1

2

Ma

r-1

2

Ma

y-1

2

Ju

l-1

2

Se

p-1

2

No

v-1

2

Ja

n-1

3

Ma

r-1

3

Ma

y-1

3

Jul-13

Se

p-1

3

No

v-1

3

Ja

n-1

4

Ma

r-1

4

VIS

No VIS

PIPE Rate

Mortgage interest rates (%)

Social Housing

Non-social Housing

4.5

3.7 3.63.3 3.2 3.1 3.0 2.9 2.8 2.8 2.7 2.6

2.4 2.3 2.3 2.3 2.1 2.1 2.0 1.9 1.8 1.7 1.7 1.71.5 1.4 1.2 1.2 1.0

0.9 0.80.6 0.6

0.4 0.3

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Col

ombi

a

Kor

ea

Chi

le

New

Zea

land

Isra

el

Pol

and

Mex

ico

Uni

ted

Kin

gdom

Sw

eden

Uni

ted

Sta

tes

Icel

and

Aus

tral

ia

Est

onia

Can

ada

Slo

vak

Rep

ublic

Tur

key

Sw

itzer

land

Luxe

mbo

urg

Hun

gary

Cze

ch R

epub

lic

Nor

way

Ger

man

y

Irel

and

Aus

tria

Den

mar

k

Japa

n

Bel

gium

Por

tuga

l

Fra

nce

Spa

in

Net

herla

nds

Italy

Gre

ece

Fin

land

Slo

veni

a

Growth forecast for 2014 according to the IMF (Annual % variation)

Colombia is the leader in growth perspectives for 2014

among the countries of the OECD

Growth perspectives

Source: IMF

7.3

6.05.4 5.45.1

4.64.2 4.0 3.7 3.4 3.3 3.2 3.2 3.0 3.0 2.9 2.7 2.6 2.5 2.5 2.4 2.3 2.3 2.3 2.3 2.2 2.0 1.8 1.8 1.8

1.2 1.2 1.2 1.2 1.2 1.0 0.9 0.90.5 0.5

0.0

-1.0-1.8

-8

-6

-4

-2

0

2

4

6

8

Chi

na

Indi

a

Indo

nesi

a

Pak

ista

n

Mal

aysi

a

Col

ombi

a

Sin

gapo

re

Sau

di A

rabi

a

Chi

le

Isra

el

S. K

orea

Pol

and

HK

Mex

ico

Tai

wan UK

Aus

tral

ia

US

A

Hun

gary

Tai

land

Nor

way

Tur

key

Sou

th A

fric

a

Can

ada

Sw

eden

Cze

ch R

ep.

Sw

itzer

land

Bra

zil

Ger

man

y

Egy

pt

Japa

n

Eur

o Z

one

Aus

tria

Bel

gium

Den

mar

k

Net

herla

nds

Fra

nce

Spa

in

Italy

Rus

sia

Gre

ece

Arg

entin

a

Ven

ezue

la

Colombia is sixth economy with best growth perspectives for

2014 according to The Economist

Growth perspectives

Source: The Economist

Growth forecast for 2014 according to The Economist (Annual % variation)

6,309

8,288

11.251

20.104

4,000

8,000

12,000

16,000

20,000

2010 2014 2018 2026

With Peace and 4G, Income per capita will reach a level

of USD 20.000 in 12 years, equivalent to Portugal’s

Increase in per capita GDP

GDP per capita (Current USD)

1% PEACE1% 4G

1% PEACE

1% 4GChile: USD 14.800

10.236

15.720

Source: Ministry of Finance

An Outlook of the Colombian Economy

Ministry of Finance and Public CreditJuly 2014