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Colombia: Country Economic Forecast: 27 Jan 2012

5 Pages Oxford Economics January 27, 2012 SKU: OFE6784696

After GDP rose 4.3% in 2010, expansion was even faster in 2011, running close to 5% in H1 as rapid credit growth fuelled local demand. Recent data for Q3 show an unexpected rise in GDP growth to 7.7%, lifting nine-month growth to 5.8% as mining and construction posted double-digit rises. Hitherto, the central bank has projected 2011 growth near the midpoint of a 4.5-6.5% range, and following the Q3 data we have raised our estimate to 5.5%. Given the more difficult global backdrop, we expect growth to slow to about 4% in 2012, especially if the central bank opts to raise its key policy rate (now at 4.75%) in a bid to bring CPI inflation closer to the middle of the 2-4% target range. Inflation has shown some signs of easing and slowed to 3.7% at end 2011. Strong growth and rising imports have lifted the current account deficit despite robust exports. After a shortfall of US$8.9bn in 2010, the deficit was US$6.8bn in the first nine months of 2011 compared with US$6bn in the same 2010 period. The deficit was moderated by rising income from energy exports. We expect a 2011 deficit of almost US$10bn, offset by FDI inflows of about US$13bn, before rising to US$11bn in 2012. After 17 months in office, President Santos is firmly in the driving seat and aims to reinforce his political base. This may put the country on an improved footing by the end of his term in 2014. He is also building on past progress with efforts to curb violence led by guerrilla groups and others. It is too soon to know if a FARC peace deal can be reached.

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Colombia: Country Economic Forecast: 27 Jan 2012

Oxford Economics
January 27, 2012

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