Despite considerable rationalization in public expenditure, the fiscal deficit for 2019 was 0.4% of GDP due to the implementation of the presidential emergency plan (the fiscal surplus was 0.4% in 2018).
The current account deficit was 2.6% of GDP, financed primarily by direct foreign investment. Low currency reserves (equivalent to 3.7 weeks of imports in 2019) pose a threat to external stability. The country faces a moderate risk of debt distress.
The expected adoption of the 2019–23 Strategic Development Plan will give national priorities more visibility. Thanks to the country’s low debt (13.7% of GDP for external debt and 6.5% for domestic debt in 2018), new external concessional loans can be secured.
Moreover, normalization of the political situation and a new determination to reform and fight corruption instill a climate of confidence, which promotes new private investment in sectors that drive the economy. Average inflation in 2020 and 2021 is expected to stay around 5%.
Forecasts suggest a slowdown in GDP growth in 2020 (3.9%) and 2021 (3.4%) due to reduced mining production. The current account deficit will likely worsen in 2020 (to 4.6% of GDP) and 2021 (4.3% of GDP), and the fiscal balance will remain in the red (0.2% of GDP in 2020 and 0.3% in 2021), partly from financing the free education policy.
The economy remains dependent on mining products, which makes it vulnerable to global price fluctuations.
The dollarization of the economy reduces the efficiency of monetary policy. Structural weaknesses in internal revenue systems make it difficult to fund priority programs. Infrastructure shortages in most sectors continue to dampen economic development significantly.