Colombia’s economy expanded at its slowest pace since 2008 in the third quarter from the year earlier, as construction activity slumped.
Growth eased to 2.1 percent from 4.9 percent in the previous three months, the national statistics agency said today. The growth rate was the slowest in the Andean region, and trailed all 28 forecasts in a Bloomberg survey, whose median estimate was for growth of 3.9 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. “Tomorrow, in the board’s meeting for the policy rate, there will surely be a discussion about this GDP number and about the economy cooling. There will likely be a couple of votes in favor of a cut.”
The yield on the government’s 10 percent peso-denominated securities due in July 2024 fell 4 basis points, or 0.04 percentage point, to 5.84 percent at 11:17 a.m. in Bogota, according to the central bank.
Today’s report also showed that gross domestic product contracted 0.7 percent from the previous quarter, when it grew 1.6 percent. From last year, construction contracted 12.3 percent.
The economy has the potential to grow between 4.2 percent and 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 between 4.8 percent and 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 8.3 percent rally in the peso this year.
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