Economic growth forecast lowered to 4 percent

Colombian central bank chief Jose
Dario Uribe reduced his estimate for economic growth next year to
4 percent from a previous projection of 5 percent because of
turmoil from the worst credit crisis in 80 years. 

Growth in consumer credit should slow from the current 15
percent pace, reducing economic growth, Uribe said in an
interview with Bloomberg Television in Washington. He said the
peso’s 19 percent fall since Sept. 1 won’t add significantly to
inflation because the currency had been “extremely overvalued.”

“It’s important for the market to know that the macro-
economic conditions are in place to lower inflation considerably
in 2009 and 2010,” said Uribe, who was in Washington attending
the International Monetary Fund’s annual meetings.

Annual inflation slowed to 7.57 percent in September, down
from a seven-year high of 7.87 percent in August. The bank has
acknowledged it is unlikely to meet its target inflation range of
3.5 percent to 4.5 percent this year.

Uribe said investment will remain at current levels of about
28 percent of gross domestic product next year, as companies take
advantage of record profits and government tax incentives.

Recently eliminated capital controls will help Colombian
companies weather the credit crisis, Uribe said. The central
banker said he didn’t expect Colombian companies to report the
losses on currency derivative contracts that have been seen in
Brazil and Mexico.

Colombia last week eliminated controls on foreign borrowing
and foreign investment in fixed income securities imposed in May
2007, along with a 500 percent limit on the leverage financial
institutions may attempt from investments in derivatives.

“Those who criticized the controls at the beginning, now
thank us because they don’t have to face this,” said Uribe. (Bloomberg)

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