Economy Impacts in Colombia Due to Extended Quarantine

Colombia is experienced huge economy impacts due to coronavirus and the long quarantine that has been extended multiple times in Colombia. GDP in Colombia dropped 16.65 percent in May.

The Colombian economy grew 1.1 percent in the first quarter of 2020. But after expansion in January and February this was offset by the start of pandemic measures in March.

Colombia previously has only experienced one year of negative GDP growth since records began. That was in 1999.

In April, Colombia’s economy contracted 20.5 percent versus the same month in 2019, which was the largest fall in GDP on record.

In May 2020, this improved somewhat as some sectors returned to work, GDP dropped 16.65 percent compared to May 2019.

In May, Colombia’s closely watched urban jobless rate more than doubled to 24.5 percent, from 11.2 percent in the same month of 2019. Nationally, in May the unemployment rate more than doubled compared to a year ago, to 21.4 percent.

In June 2020, the urban jobless rate in Colombia was 24.9 percent, up from 10.7 percent in the same month in 2019, amid mandatory preventive isolation from the pandemic of coronavirus that semi-paralyzed the fourth largest economy in Latin America.

Colombia Quarantine: Nationwide Quarantine Extended to September 1

Colombia’s Quarantine May be the Longest in the World – 160 days

Colombia’s initial nationwide quarantine was originally ending on April 13 but it has now been extended eight times:

1. On April 6, was extendedto April 26
2. On April 20, was extendedto May 11.
3. A third time was extendedto May 25
4. A fourth time was extendedto May 31
5. A fifth time was extended to June 30
6. On June 23, was extended a sixth time toJuly 15
7. On July 7, was extended a seventh timeto August 1
8. On July 28, was extended an eighth timeto September 1

So, the national quarantine is now for 160 days. This reportedly may be the longest in the world with the average quarantine in Europe for about 90 days.

Quarantine Impacts on the Colombian Economy

At the beginning of 2020, Banco de la República in Colombia projected that the Colombian economy would grow 3.7 percent in 2020.

Today the situation is completely different, due to the coronavirus pandemic and a national quarantine shutting down much of Colombia’s economy.

The IMF projects that Colombia’s GDP will contract 2.4 percent in 2020. However local estimates show a bigger drop. The Ministry of Finance in Colombia estimates the Colombian economy will contract 5.5 percent this year.

The Fedesarrollo think tank updated its growth projections for Colombia and for a scenario with a weak recovery in private consumption for the remainder of the year, this would lead to a fall in GDP of 7.9 percent in 2020 and unemployment hitting 20.5 percent.

The most optimistic outlook from Fedesarrollo implies a contraction of the economy of 2.7 percent for this year and an unemployment rate at the end of 2020 of 16.3 percent. According to Fedesarrollo, the hardest hit sectors of the economy include trade, transportation, tourism, food services, entertainment and construction.

Also, according to Departamento Administrativo Nacional de Estadística (DANE) micro, small and medium-sized companies represent 80 percent of Colombia’s employment.

The small and medium business are experiencing huge issues with working capital, unable to pay employees and many have already shut down. Tens of thousands of small businesses in Colombia have already shut down.

The risk of continuing the quarantine much longer is that many small businesses in Colombia will likely fail and unemployment could skyrocket in Colombia.

Airlines have been hard hit, Avianca Airbus A318 by Andrés Ramírez

Hardest Hit Sectors in Colombia

The hardest hit sectors of the economy include trade, transportation, tourism, food services, entertainment and construction.

The airline transport industry in Colombia has been hard hit with no flights except for limited humanitarian flights and cargo flights.

The extended closure is having a devastating effect on the entire travel value chain. Estimates are that revenues generated by airlines operating in Colombia will fall by 55 percent in 2020 as compared to the previous year and that 38,484 direct jobs and 307,200 indirect jobs are at risk.

Aviation in Colombia is a sector of great importance and value. Prior to the COVID-19 crisis it generated more than 600,000 jobs and contributed US$7.5 billion to the country’s GDP, which is about 2.7 percent of Colombia’s GDP.

International Flights Resume in Colombia in September

Colombia may be slowly resuming air travel including domestic flights starting in July and international flights in September. But this is expected to be a slow resumption with limited flights.

Also, the impact on the bus transport industry in Colombia has been tremendous. There are bus routes between over 1,100 municipalities in Colombia.  And the companies in this sector reportedly have about 125,000 direct, formal employees.

Bus Land Transport in Colombia Resumes Between Cities in Colombia – Medellin Guru

Some bus routes have continued to operate between some cities in Colombia. But these have been very limited due to the quarantine only permitting travel in special cases. But Colombia is starting to slowly open bus land transport between cities and towns.

According to Mariano Quintero, president of the National Association of Transporters, the recovery of the bus transport industry will be very difficult between now and December due to more than half of the companies could go into default and bankruptcy.

Hotel Intercontinental in Medellín, Photo courtesy of Hotel Intercontinental Medellín

In addition, the hotel business in Colombia has been devastated due coronavirus. According to DANE, revenues at hotels dropped 93.5 percent in May 2020 compared to May in 2019. And hotel occupancy in Colombia in July dropped to record low of only 3.2 percent.

Furthermore, restaurants have been hard hit by the quarantine with only delivery and takeout service permitted. So, thousands of restaurants in Colombia have reportedly closed.

Also, schools are closed and churches are closed in Colombia. And the Catholic church in Colombia reportedly is near bankruptcy.

Computer generated image of COVID-19, photo by Felipe Esquivel Reed

Medellin Guru’s Coronavirus Series

Medellin Guru has a series of articles about the coronavirus pandemic and the impacts in Colombia: Also, these articles are being kept up-to-date, as this is a fast-moving topic:

• Economy Impacts in Colombia Due to Extended Quarantine
• Humanitarian Flights from Colombia to the U.S. and Other Countries
• Beware of Fake News in Colombia About Coronavirus and Quarantines
• Medellín Starts Free COVID-19 Tests on the Medellín Metro
• New COVID-19 Preventive Measures in Medellín to Contain the Pandemic
• Penalties for Violating the Quarantine in Medellín are Stiff
• COVID-19 Orange Alert in Bogotá: New Lockdowns in Bogotá
• Medellín Starts to Lift the Quarantine: Enters Smart Isolation Phase
• Colombia Started to Lift the Quarantine – What Does this Mean?
• Coronavirus: When Will the Quarantine Be Lifted in Colombia?
• Colombia Starts to Lift the Quarantine in COVID-19 Free Areas
• Colombia Quarantine: Nationwide Quarantine Extended to September 1
• Coronavirus in Colombia: Myth vs Reality – Current Status
• Coronavirus Hospitalization in Colombia: Myth vs Reality
• Are Medellín and Antioquia Winning the Coronavirus Battle?
• 23 Cities with a Major Increase in Coronavirus Cases in Colombia
• Colombia Coronavirus Death Rate: What are the Chances of Dying?
• Coronavirus: When Will Things Return to Normal in Colombia?
• COVID-19 Testing in Colombia: Realty About Coronavirus Testing
• Life as an Expat: During Medellín’s Coronavirus Quarantine
• Colombian Visa Process Changes: Due to Quarantine and Coronavirus
• Medellín Coronavirus Closures – What is Closed in Medellín?
• Pico y Cedula: A Restriction for Grocery Shopping in the Aburrá Valley During the Quarantine
• Pico y Cedula in Colombia: Which is Strictest Out of 5 Largest Cities?
• Medellín Quarantine Starts on March 20 for Four Days

The Bottom Line: Economy Impacts in Colombia Due to Quarantine

The short and long-term impacts of coronavirus shutdown appear to be ominous for the economy in Colombia.

The current crisis will have a global impact, but developing countries like Colombia could be some of the worst affected.

The effects, unsurprisingly, will be felt hardest in the poorest of Colombia. Hospitably and tourism workers, cleaners and the huge number of informal workers have already seen their meager incomes cut.

About 46 percent of the entire working population of Colombia depends on informal work. This is a complex phenomenon that includes domestic workers, street vendors, merchants, construction and field workers.

An estimated 5.7 million of the nation’s workers live on what they earn without paying income tax. So, they have no access to work and health benefits. And many have lost their livelihoods amid lockdown measures.

Most small business in Colombia run on thin margins and tiny cash buffers. Many will not survive until the end of the quarantine currently scheduled until September 1. And what happens if the quarantine in Colombia is extended even longer?

Medellin Guru plans to look at economy impacts on the Colombian economy in more detail in future articles.

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