Convención de la organización para la cooperación y desarrollo económicos
| Fecha de publicación | 23 Agosto 2023 |
| Número de Gaceta | 1124 |
Página 24 Miércoles, 23 de agosto de 2023 Gaceta del Congreso 1124
CONVENCIÓN DE LA ORGANIZACIÓN PARA LA COOPERACIÓN
Y DESARROLLO ECONÓMICOS
Comments from the Colombian delegation to
Croatia Economic Survey 2023
From the Colombian delegation, we value this precise and comprehensive diagnosis of the
Croatian economy. The draft summarizes accurately the main developments, strengths, and
challenges of the country, and provides recommendations of the required measures in a
compelling manner. As we share most of the report’s considerations, we will focus on those
aspects where there is room for further adjustments.
x The report highlights growth in 2023-2024 would be driven by the recovery in households'
real disposable income due to wage and employment growth, resulting in consumption
as one of the growth engines in paragraph. However, the private consumption growth
forecast is 0,3% in 2023 (falling from 5,1% in 2022), while GDP projected growth is 2,1%.
Therefore, it seems unclear how consumption would represent a growth driver, and this
inquiry persists for the 2024 data.
x The report mentions the recovery of quarterly growth in 2023, but only presents the data
for annual growth. It could be helpful to include quarterly growths for 2022, 2023 and
2024, comparing them with the pre-pandemic historical average, in order to show how
favorable is the recovery in the quarterly dynamic.
x Table 2.2. shows the output gap was 3,3% of the GDP in 2022 and would increase to
3,4% of the GDP in 2024. The Colombian delegation considers that maintaining an
output gap above 3% of GDP for three consecutive years could generate some adverse
pressures on economic sustainability, such as inflationary pressures. It could be helpful
to answer the following questions: how do you assess the potential risks derived from a
high and persistent output gap? Should economic policy be guided towards reducing this
output gap through counter-cyclical policies in the short-term to assure economic
sustainability in the long term? When is the output gap expected to be fully closed?
x Croatia's current account deficit in 2022 was strongly affected by international commodity
prices. This is reflected in the trade balance data presented in the document. However,
the paper does not provide insight on current account projections for 2023, which the
Colombian delegation expects would be corrected, mainly through the reduction in
international energy prices. We suggest, if possible, including projections for this variable
as well as explaining the drivers that would explain the expected correction for this year.
x The document provides a very detailed analysis of the energy transition process in
Croatia, its financing needs, challenges, and progress up to date. We believe that this
type of analysis is of the upmost relevance nowadays, considering the need for countries
to meet their environmental goals and contribute to mitigate and reduce their impacts on
climate change. As in Colombia, Croatia currently subsidizes a portion of its fossil fuel
prices, as a measure to contain the effects on the population’s purchasing power and
inflation derived from high international oil prices. The Colombian government has been
committed to increasing fuel prices gradually, so that this subsidy will disappear,
contributing to the expected adjusted in domestic demand and in alignment with the
energy transition. We suggest the Croatian delegation to analyze the case of Colombia.
x In line with mentioned above, fuel subsidies have become one of the main fiscal and
economic concerns for Colombia’s national Government. In 2022 the implicit fuel
subsidies given through the Fuel Stabilization Found (FEPC) reached 2,5% of GPD.
Considering that this expenditure is highly regressive and inefficient, Colombia is taking
different measures to reduce this subsidy, but we still have a long way to go to reduce
the gap between local and international diesel prices (witch determinates the level of the
implicit subsidies given by the Government). In this sense, it will be very useful for us to
have more details about Croatia’s fuel stabilization policy, and how they plan to gradually
reduce or eliminate fuel subsidies, considering the economic and social implications of
these measures.
x In terms of the labor market, the Colombian delegation finds this analysis very
comprehensive. Several challenges are presented and the solutions the country has
been implementing are clearly stated. There is enough detail about the programs that
are in place or that the Government intends to implement to face those challenges.
x The report recognizes Croatia faces difficulties in terms of education and skills of its
working age population. The path the country will follow to overcome them is clear and
well described in the report, as well as the challenges that may arise while implementing
these policies. Colombia shares with Croatia some of the issues that have been outlined
in the report, in terms of its labor force skills. Thus, monitoring the results of Croatia in
this matter could be a great opportunity for Colombia to learn from this and implement
similar policies going forward.
x Box 2.7 illustrates that enhancing tax compliance and enforcement efforts could
potentially result in a 0.3% of GDP increase on tax revenues by 2025. The Colombian
Tax Administration's modernization program, began in 2017, is projected to reach tax
revenues equivalent to 2.1% of GDP by 2023. This achievement is attributed to three
key components: i) institutional organization and human resources; ii) tax control and
compliance; and iii) technology, data, and information security. It would be insightful to
zoom in on which Croatia tax administration's strategies would achieve this target and
determine the reasons for any constraints to reach a higher outcome.
x In Section 3.2.1, there are suggestions to enhance tax revenues. Following a similar
approach to taxing property values, Colombia implemented a permanent wealth tax as
part of the 2022 Tax Reform. Unlike previous temporary wealth taxes that employed a
flat rate, the new wealth tax adopted a progressive marginal rate system and included a
housing exemption. This tax enhances the progressivity of the tax system by targeting
higher-value wealth, which is closely associated with individuals with higher incomes.
The marginal rate structure minimizes distortions in the economic structure, thereby
safeguarding investment and efficiency in the Colombian economy.
x Regarding the tax structure and enhancement opportunities in Croatia, in 2021 the
Colombian Government completed a Tax Expenditure Report with the support of a
commission of tax experts. This report provides Colombia's tax structure analysis about
tax-free exemptions and explores opportunities for improvement in areas such as VAT,
Personal Income Tax, and Corporate Income Tax. A similar approach, establishing a tax
expert commission could be beneficial for assessing and enhancing the tax structure in
Croatia.
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