Colombia’s economy grew less than analysts expected in the third quarter and at the slowest pace in the Andean region as construction activity slumped. Bond yields fell as traders increased bets that the central bank will cut interest rates tomorrow.
Growth eased to 2.1 percent from 4.9 percent in the previous three months, the national statistics agency said today. The increase trailed all 28 forecasts in a Bloomberg survey, where the median estimate was 3.9 percent. It also trailed Mexico’s 3.3 percent growth, while outpacing Brazil’s expansion of 0.9 percent.
Colombia’s central bank has cut interest rates at three of its last five policy meetings to try to shore up growth amid the weakening global economy. Policy makers will hold the benchmark rate at 4.5 percent at their board meeting tomorrow, according to 28 of 31 analysts surveyed by Bloomberg, while three analysts predict another quarter-point cut.
“It was a big surprise, we weren’t expecting anything close to that number,” said Rafael Neira, a financial risk analyst with GNB Sudameris, in a telephone interview from Bogota. At tomorrow’s rate meeting “there will surely be a discussion about this GDP number and about the economy cooling. There will likely be a couple of votes for a cut.”
The yield on the government’s 9.25 percent peso debt due in May 2014 fell 17 basis points, or 0.17 percentage point, to 4.72 percent, according to the central bank.
The third-quarter growth was the slowest since 2009, according to revised data published today by the statistics agency. From last year, construction contracted 12.3 percent. Mining activity grew 0.5 percent from a year earlier, compared with 8.5 percent growth in the previous quarter.
Today’s report also showed that gross domestic product contracted 0.7 percent from the previous quarter, when it grew 1.6 percent.
The economy has the potential to expand 4.2 percent to 5.3 percent without fueling inflation, central bank Governor Jose Dario Uribe said in a Dec. 13 interview.
With little risk of inflation taking off, the central bank should try to ensure that the economy expands at an annual rate of 4.8 percent to 5 percent, central bank co-director Carlos Gustavo Cano said in a Dec. 7 interview. Colombia is the only major economy in the Americas apart from Brazil to have lowered borrowing costs in the past six months.
Annual inflation slowed to 2.77 percent in November, its lowest rate since 2010, and three measures of “core inflation” tracked by the central bank also eased. Colombia targets price growth of 3 percent, plus or minus one percentage point.
Industrial output grew 1.2 percent in October from a year earlier, after contracting in August and September, according to a statistics agency report published yesterday. Manufacturers have been hit by the weak world economy, and by a 8.4 percent rally in the peso this year.