Prices on upward path.  Consumer prices rose 1.1% in April over March, the fourth consecutive monthly increase over 1% and well above the average of 0.7% observed in the last twelve months.  As a result, annual inflation increased to 7.9% in April from 7.8% in March.  The annual inflation rate continues to move closer to the Central Bank’s target of 8% for this year.  Rising inflationary pressures were already factored into last month’s Consensus Forecast and as a result in this month’s publication panellists again expect the monetary authorities to overshoot the target.  The less favourable inflation outlook is likely to prompt some monetary tightening this year.  As a result the benchmark DTF interest rate is expected to rise from the current level of 12.7% (7 May).

Export growth slowing.  The recovery in Colombian economic growth over the last year has been propelled by a strong expansion in exports, particularly manufactured exports.  Recent trade data foreshadows that the propitious export-led expansion may be forestalled by the downturn in global demand, particularly in the United States.  In February, exports declined 9.6% over the same month last year.  The decline can be attributed to a 39% decline in traditional exports, as coffee, oil and coal sales were down 51.7%, 39.2% and 30.1% respectively.  Non-traditional export growth remained in positive territory, registering a 2.0% increase as a result of strong flower and banana sales.  Import growth remained strong at 26.6%.  As a result, the annual trade balance surplus narrowed from US$ 1.4 billion last month to US$ 1.1 billion this month.  Panellists, however, remain confident that export growth will resume and the surplus will widen again by the end of the year.

Note:  The above text is an abridged version of the LatinFocus Consensus Forecast briefing on Colombia.  For more details please click here.

For five-year forecasts, please click here.