Colombia’s Central Bank reduces GDP projection, inflation will exceed target

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Colombia’s Central Bank reduced its economic growth forecasts for this and next year well below government goals while raising its inflation projection for 2019 over the target

Colombia's central bank logo is seen in Bogota, Colombia. October 1, 2018. REUTERS/Luisa Gonzalez

Reuters 

Colombia’s Central Bank reduced to 3% the projection of expansion of the Gross Domestic Product (GDP) for 2019, from an original 3.5%, due to weak external demand for exports, while forecasting an internal consumption similar to last year, when the economy grew 2.6%.

"There is a worrying issue in terms of economic growth and balance of payments. What can be done to reactivate exports for me is a vital issue," Central Bank co-director José Antonio Ocampo said in a forum.

The new projections of the Central Bank are now aligned with those of local and international markets, which expect a 3.15% growth, according to the latest Reuters poll, less optimistic than the government's 3.6% target.

A probability chart (fan chart) of the Central Bank showed that by 2020 the bank projects a growth between 3.2% and 3.3% "taking into account the negative effects of a greater global uncertainty about investment decisions."

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"Also, a slowdown in public consumption is contemplated," he added. The Ministry of Finance set a GDP growth target of 4% for next year.

The Central Bank’s General Manager, Juan José Echavarría, plans to present the traditional quarterly inflation report on Monday, August 12. The projections would play in favor of the organism keeping its reference interest rate stable at the current 4.25% during the remainder of the year, as most analysts expect.

Meanwhile, according to the graphs, the Central Bank projects that inflation would close this year between 3.6% and 3.7%, further from the 3% target set previously, although Ocampo said that "the country does not face a serious problem" with inflation.