|
Continued
strong export growth and industrial expansion should propel the economy
forward with consumption contributing a lesser share.
Nevertheless, panellists anticipate growth to be below the
government’s 3.8% target agreed to with the International Monetary Fund
(IMF).
Annual
inflation on a downward path.
Consumer prices rose 1.0% in January over December, which brought down
annual inflation from 8.75% in December to 8.5% in January - the lowest
level in thirty years. Food and culture/recreation prices led the
monthly increase, rising 2.1% and 2.3% respectively. Clothing and
housing remained at the bottom end of the consumer price increase with
0.2% and 0.3% over December. Panellists still believe the Central
Bank’s 8% inflation target is overly optimistic. In fact, the
Central Bank is expected apply some monetary tightening in order to bring
down inflation. This month’s Consensus Forecast expects the
benchmark DTF interest rate to rise throughout the year.
Nevertheless, panellists have become more confident that the Central Bank
will have to tighten to a lesser degree than anticipated last month as
evidenced by the downward revision of the interest rate forecast in this
month’s Consensus Forecast over last month.
Fiscal
balances receive relief.
On 29 January, the government and the IMF reached an agreement to raise
the fiscal deficit target for this year from 2.5% to 2.8% of GDP.
The government had requested the adjustment in lieu of a Supreme Court
decision in late October last year that mandated retroactive inflation
salary adjustments for federal employees. While the government is
confident that the new tax reform law will provide for the necessary
funds, concerns about the likely effect of tax increases on economic
activity prompted the petition for more fiscal flexibility. Even
though oil prices are expected to remain at the current budgeted price,
the government will also have to remain vigilant of developments in the
oil sector, since price declines could serve to undermine the fiscal
balance. Nevertheless, this month’s Consensus Forecast does not
foresee unexpected developments to undercut this year’s fiscal
stability, with the deficit anticipated to be on target with the new IMF
fiscal agreement.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Colombia. For more details please click here.
|
