The Colombian economy has been hit by the sharp fall of international oil prices, which
was characterized for being unexpected, sudden and of considerable magnitude. According to
analysts, this shock could be persistent and last for several years. On top of that, the volume of oil
production in the country could also decrease due to a fall of investment in the sector in the context
of lower oil prices. This document aims to provide a descriptive analysis of the recent oil shock, its
determinants, and their implications for the Colombian economy. To date, falling oil prices have
deteriorated the country's terms of trade and thus, its national income. Other key variables such as
the current account, the exchange rate, the public finance, market’s confidence and the country risk
premium have also been affected. As a result, a significant economic slowdown is taking place. The
economic policy response has been coherent with a sound institutional framework previously
established, which has encouraged an orderly adjustment to the new external circumstances. Among
the key elements of such framework it is worth mentioning an inflation-targeting scheme with
flexible exchange rate, a fiscal rule for the central Government, and a macro-prudential policy
aiming at preserving financial stability