Colombia’s economy probably entered
a recession in the first quarter of 2009 and will begin recovery
in the second half as long as government spending and foreign
investment bolsters growth, Standard & Poor’s Rating Services
analyst Richard Francis said.
The gross domestic product will probably grow 1 percent in
the full year, Francis said during an interview at the Inter-
American Development Bank’s annual meeting in Medellin,
Colombia. Foreign investment this year could be between $6
billion and $8 billion, less than last year’s $10 billion.
“We are expecting to see very significant foreign direct
investment,” said Francis. “That’s very good on a global
context. The investment will create a lot of jobs and generate a
lot of economic activity”
President Alvaro Uribe last night in a speech to the
development bank meeting called on investors to maintain
confidence in Colombia and keep up their funding of
infrastructure and public works projects. Growth prospects would
probably evaporate should the expected investment plans fail to
materialize, Francis said.
“There could be zero or even negative growth for the whole
year,” he said. “That’s a possibility. But I think the
projects will get off the ground.”
Colombia’s $172 billion economy contracted for the first
time since 1999 in the fourth quarter of 2008 as the deepening
global recession curbed exports and stalled consumer spending.
Gross domestic product shrank 0.7 percent in quarter, the
national statistics agency said March 26. By comparison, GDP
grew a revised 8.1 percent in the fourth quarter of 2007 from a
year earlier. For all 2008, GDP expanded 2.5 percent, the
slowest pace since 2002.
Latin America’s fifth-biggest economy also slowed last year
on the decision of central bank policy makers to raise interest
rates to the highest level since 2001 to stem inflation. With
borrowing costs at an eight-year peak, the global financial
crisis spread to Colombia, stifling exports and prompting
consumers to scale back purchases of durable goods such as
washing machines and cars.
The government lowered its 2009 GDP forecast from 3 percent
to a range of 0.5 percent to 1.5 percent and the central bank is
expected to cut its official rate from the “lower” end of 1
percent to 3 percent. The central bank cut its key lending rate
300 basis points to 7 percent since December.
Efforts by Uribe, who took office in 2002, to bring an end
to the drug-funded violence that has plagued Colombia for more
than four decades has helped to produce annual growth rates of
more than 3 percent for five straight years. (Bloomberg)