Central bank Governor Jose Dario Uribe said he expects the economy this year to post its slowest expansion since 2009 as prices for Colombia’s biggest export tumble on global markets.
Calling an estimate of 3 percent growth “reasonable,” Uribe said the central bank’s technical staff also may cut its 2015 forecast from 3.1 percent or 3.2 percent, which is down from 3.6 percent earlier in 2015. While 3 percent would be the weakest since 2009, economists expect Colombia’s expansion to beat the regional average for a fifth straight year.
“We’re in a transition period from an economy that was propelled by the rise in prices of oil and other commodities and so Colombia has to adjust,” Uribe told reporters in Cartagena.
With oil accounting for around half of Colombia’s exports and about 17 percent of government revenue, a 50 percent drop in crude prices has pushed the peso to an 11-year low while the current account gap may end 2015 at a three-decade high. The peso’s decline has been “very strong,” Uribe said.
The “pass-through” of the weaker peso onto inflation has “been relatively low, much smaller than that observed in other countries in the region,” he said.
Inflation may end 2015 “slightly above” the 2 percent to 4 percent target range, Uribe said, adding that it will probably slow to close to the 3 percent mid-point target in 2016.
The peso has plunged 35 percent in the past year, the worst performance after the Russian ruble among 31 major currencies tracked by Bloomberg. It closed at 2,852.76 per dollar in Bogota, the weakest since November 2003.
“Exchange rate flexibility has been greatly beneficial to the Colombian economy,” Uribe said.