Colombia’s central bank chief Jose Dario Uribe said the country’s economy may expand 1 percent next year in the “worst case scenario” due to turmoil resulting from the worst credit crisis in 80 years.
Growth may decelerate to 1 percent to 4 percent depending on how the global slowdown affects consumer confidence, capital flows and exports to the U.S., Venezuela and Ecuador, Uribe said at the bank’s quarterly presentation in Bogota. The economy may slow to 3.5 percent in 2008 from 8 percent last year.
“We can’t say exactly what will happen,” said Uribe, adding that inflation will ease in an “important way” in 2009. “Monetary policy has helped Colombia face the shocks we’re
seeing from the global crisis.” He said the bank’s next decision would be to cut interest rates, without giving a time frame.
Uribe, who heads the central bank’s seven-member board, said 16 interest rate increases since April 2006 may help bring down inflation next year to under 5 percent.
The central bank has maintained the benchmark rate at 10 percent since a quarter-point increase in July.
Surging consumer demand in Colombia since President Álvaro Uribe took office in 2002, pledging to make the nation safe from drug-funded violence, helped drive the US$172 billion economy last year to its fastest expansion in decades.
That growth has since tapered off, as costly bank lending and concern over the global economic crisis prompts consumers to curb spending and put off the purchase of big ticket items.
Policy makers have increased borrowing costs by 4 percentage points since April 2006 to rein in inflation that’s held above the bank’s target of 3.5 percent to 4.5 percent for more than a year. Inflation will end 2008 at about 7.5 percent, Uribe said. (Bloomberg)