The economy is projected to expand by 6.1% in 2021 and 1.8% in 2022, when it will still be below pre‑pandemic activity levels. Persistent macroeconomic imbalances and new mobility restrictions will weigh on domestic demand and limit the recovery. Continued monetisation of the fiscal deficit will keep inflation high. Job creation will slowly recover, but high informality remains a concern.
Stronger revenues, partly related to high commodity prices, have slightly improved fiscal outcomes, while pandemic-related spending will be withdrawn gradually once the recovery firms. This will reduce the need for monetary financing in the short run. Outlining a medium-term path towards fiscal sustainability would help to shore up confidence and bolster investment. Improvements in public spending efficiency, and a review of exemptions in the tax system, present ample scope for fiscal savings. Expanding conditional cash transfers can help reduce poverty, affecting 42% of the population, and support incomes, including for informal workers.