The chief of the International Monetary Fund (IMF) mission in Colombia has praised the country’s economic policy and predicted a 4.3% growth in GDP this year.
IMF Chief of Mission Valerie Cerra told reporters in Bogota on Thursday that monetary policy and fiscal measures were stimulating the construction sector and civil works, which would lead the country to achieve an annual GDP growth of about 4% in the medium term.
“From this point of view, the framework under which the oil royalties are distributed to regions and the 2012 reforms aimed to rationalize the tax system and make it more equitable have all been positive steps,” Cerra said.
She approved of moves by the Colombian central bank to take advantage of abundant capital inflows from foreign direct investment to further increase its foreign reserves, especially of US dollars.
|“From this point of view, the framework under which the oil royalties are distributed to regions; and the 2012 reforms aimed to rationalize the tax system and make it more equitable, have all been positive steps.”|
Cerra also suggested that the Central Bank could now move on interest rates.
The central bank had maintained the official interest rate at 3.25% since March last year. When interest rates are low, it is easier to get a loan, usually causing prices to rise, that is, inflation. But the central bank has been taking advantage of low inflation due to temporary supply shocks that reduced food prices and electricity.
“As temporary factors disappear and inflation gradually approach the midpoint of the target range of 3 percent, we believe [Colombia] could increase the interest rate, leading to a level close to neutral inflation,” she said.
In November 2013, Cerra told Colombia Reports that key bottlenecks for growth remain, for example, inadequate infrastructure and combating inequality.
“However, the ambitious program for infrastructure investment, particularly the new generation of road concessions, should help alleviate these bottlenecks, provided that the implementation remains fiscally responsible,” she said in 2013.
Good figures, gloomy consumer confidence
Despite Cerra’s positive projections and structural strengths of the Colombian economy, consumers continue to worry about job security and the economic prospects of 2014. Colombia started the year at 10.9 on the national consumer confidence index.
The latest consumer confidence figures released on Thursday showed that although consumer confidence was up from 14.9 in February to 15.7 , it was still recovering from a massive slump in January, according to El Pais newspaper.