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Price
pressures persist.
The price pressures observed in the first two months of the year
persisted. In March, consumer prices rose 1.48%, more than twice the
average rate observed in the past twelve months. Nevertheless, the
annual rate dropped to 7.8% from 8.1% in February - well below the 8.7%
quarterly inflation target set by monetary authorities. The Central
Bank remains confident that seasonal price pressures will abate quickly,
which would enable authorities to meet the 8.0% inflation target for this
year. Panellists, however, are less optimistic; anticipating that
stronger domestic demand this year will exert some upward pressure on
prices. The Central Bank is likely to counter rising inflationary
expectations through some monetary tightening. In the first three
months of the year, the benchmark DTF has remained around 13.3% but the
Consensus expects the rate to rise steadily throughout the year.
International
Monetary Fund (IMF) endorses economic policy.
At the end of March, the IMF approved the government’s current economic
policy initiatives, which enables Colombia to maintain access to a 3-year
US$ 2.8 billion Extended Fund Facility (EFF). In the letter of
intent sent to the IMF the government commits to strengthening the
domestic financial system by developing a new legal framework for stock
and bond issuance by financial institutions. Furthermore, the
government pledges to implement second-generation pension reforms,
presenting to Congress a draft of a new fiscal responsibility law before
October, selling existing state-owned banks Bancafé, Granahorrar and
Interbanco this year, and to reform the Social Security Institute (ISS).
In addition, the government outlined its macroeconomic targets for this
year, which include 4% GDP growth, a 2.8% of GDP fiscal deficit and 8%
inflation. Finally, the government committed to implementing
quarterly inflation targeting which sets inflation for this year at 8.9%,
8.6% and 8.0% for the second, third and fourth quarters respectively.
The targeting scheme permits a 2-percentage point margin.
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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