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Economic
growth prospects remain good.
Since consumption will remain timid this year, export growth will be the
key driver behind economic growth this year. Consensus Forecast
participants remain optimistic about the economic prospects but expect the
final figure to be shy of the government’s 3.8% target.
Furthermore, an acceleration of consumption growth and a healthy
investment expansion will provide the backdrop for a strong rebound next
year.
Inflation
remains on downward trajectory. Since
the monthly price spike of 1.9% in February reflects seasonal
developments, annual inflation continued on a downward path.
Increased spending associated with the beginning of the school year drove
education prices up 4.3% over January, while food prices rose 3.3%.
On an annual basis the only lingering significant upside pressure comes
from transportation prices, which continue to be affected by higher fuel
costs in lieu of current oil price levels. The oil price as measured
by the US$ price per barrel of Western Texas Intermediate again rose above
the US$ 30 per barrel mark in mid-February. Nevertheless, annual
inflation inched down another 0.4 percentage points in February to reach
8.1%, a 0.1 percentage point notch above the Central Bank’s target for
this year. However, participants believe that the current economic
recovery will put some upside pressure on inflation and, as a result, have
bumped up their annual forecast for this year. Even though interest
rates on the benchmark DTF interest rate dropped off moderately, by 30
basis points in February, the recent trend of rising interest rates in
response to the Central Bank’s more restrictive monetary policy is
expected to endure through the end of the year.
Trade
balance surplus narrowing.
Preliminary trade data for January indicate that declines in traditional
exports of coffee and oil dragged down total export growth. The
government claims that coffee was the key culprit, experiencing a 30% drop
over January last year, while oil exports registered a 17.4% decline over
the same period. Participants, however, are confident that Colombia
will remain on a strong export-driven recovery path, propelled principally
by continued solid industrial good exports. In fact, the expected
trade balance surplus for this year was revised upward again. On the
other hand, an expected upturn in consumption and increased investment
next year is likely to substantially raise imports and contribute to a
deterioration of the trade balance surplus in 2002.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Colombia. For more details please click here.
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