The fall in Colombia’s peso, which this week slumped to its weakest level in 11 years, will help narrow the current account gap and boost growth, Finance Minister Mauricio Cardenas said.
“The flexible exchange rate helps us to stimulate exports and substitute imports, so that the current account deficit falls,” Cardenas said Thursday evening, in an interview in Bogota. “This is something we consider highly desirable.”
The drop in oil and coal prices last year caused Colombia’s current account gap to balloon to the widest since 1997. The deficit will narrow this year from the 7 percent of gross domestic product that it reached in the first quarter, Cardenas said, while declining to give a forecast.
The economy has behaved with “absolute normality and stability” in recent days amid the crisis in Greece, Cardenas said.
In a separate interview broadcast Thursday evening on Red + Noticias TV, Cardenas said the weaker peso will help growth to recover toward its “cruise speed” of between 4.5 percent and 5 percent per year. This year the economy will expand by about 3.5 percent, he said.
The peso fell to its weakest since June 2004 on Tuesday, as oil, the nation’s biggest export, dropped on concern that a slowing global economy will pare demand.
A slowdown in China is probably more significant for Colombia than Greece’s difficulties, since it will curb demand for the commodities that the Andean nation exports, Cardenas said. The Shanghai Composite Index has lost about a quarter of its value over the last month as margin traders unwound bullish bets.
Colombia will enter an era of “intelligent austerity” as it plans its 2016 budget, Cardenas said. This will involve cuts to practically all parts of the state, he added.