Colombia Faces Economic Slowdown
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The Colombian economy may slow in 2015, top banking officials have stated. In a statement released by the chair of the Banking Association of Colombia (BAC), Mr. Santiago Castro mentioned that Colombia’s economic slowdown would be quite strong. However, it would fall short of a recession. Castro released this statement at the 27thCongress of Treasury, in Cartagena.
The Colombian economy may slow in 2015, top banking officials have stated. In a statement released by the chair of the Banking Association of Colombia (BAC), Mr. Santiago Castro mentioned that Colombia’s economic slowdown would be quite strong. However, it would fall short of a recession. Castro released this statement at the 27thCongress of Treasury, in Cartagena.
Castro also stated that the economic slowdown marked the beginning of what he opined would be a complicated year for the economic growth of his country. Subsequently, he also stated that he did not expect the country’s gross domestic product (GDP) growth rate to drop below zero. He has further predicted that Colombia’s economy would grow between 3.5% and 4%, below the government prediction of 4.2%, which was itself recently revised.
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Unchanged Borrowing Costs
In a related chain of events, Colombia’s central bank decided to keep borrowing costs unchanged for the fifth time in as many months, but subsequently cut its growth forecast for the year 2015. This forecast has come following a slump in global oil prices.
The seven-member board of Columbia’s Central Bank voted unanimously to leave overnight lending rate at the prevailing 4.5%, recorded in a statement released by Columbia’s governor, Jose Dario, in Bogota after their meeting. Financial analysts earlier predicted the decision.
Stunted Growth
The reduction in policy makers forecast for economic growth from 4.3% to 3.6% has also raised the prospect of interest rate cuts to rejuvenate growth, as stated by the chief economist at the Banco de Bogota, Camilo Perez. Rates could be cut as early as April of this year.
Major local and global financial analysts had reduced their average growth forecast for 2015 to 3.9% from 4.2% back in December 2014. Crude oil, an estimated 50 percent of total Colombian exports, fell by more than 50 percent since June of 2014. The global slump in crude adversely affected investments in their oil industry.
Consumer Spending
According to the Central Bank’s forecast, the Columbian economy only grew by 4.8% in 2014. Strong consumer spending helped. That growth rate is better than some U.S. states and cities, but Columbia certainly aims to perform better.
As retail sales rose 8.4% in November from the same time in the previous year, industrial output dropped 0.9% over the same period. Gross lending over a 12-month period through November increased by 14.5%.
The nation’s annual inflation rate increased to 3.66% last year, the highest in three years and well above the 3% median of Columbia’s central bank target range. The country’s central bank governor, Uribe, stated that a strong drop in the value of the peso this year would temporarily increase the prices of a few imported goods, without affecting the country’s general inflation rate.
