Colombia’s economy will grow only 2.8% in 2015, according to the country’s central bank, which on Tuesday was forced to lower its 2015 GDP growth projection due to low commodity prices.
Beset by falling oil prices, Colombia’s national currency that has fallen by over 50% against the dollar since last October, and declining consumer demand, Colombia is experiencing an economic downturn in 2015, down nearly 2 percentage points from 4.6% growth in 2014.
The country’s central bank predicted that economic growth in 2015 will end up being between 1.8% and 3.4%, with 2.8% being the likeliest number.
Colombia Finance Minister Mauricio Cardenas was more optimistic on Monday, predicting an end of the year growth at 3.3%.
The finance minister at the beginning of the year said he projected a 4.4% growth.
Still optimistic, Cardenas said he anticipated economic growth to increase in 2016 to 3.6% after the global market for oil stabilizes and an increase in foreign investment as a result of the pending peace agreement with the leftist guerrilla group, the FARC.
The finance minister expressed his bearish prediction on Twitter Monday, tweeting “Colombia has a successful economy, that will absolutely be unstoppable with a peace agreement.”
On top of the slow economic growth, the central bank also predicted that Colombia’s inflation rate will finish at about 4% – an increase of 2.9% from the previous year.
Jose Dario Uribe, the General Manager of the central bank, announced increased interest rates of 25 basis points to 4.75%, in an effort to combat rising inflation.
Interest rates determine the amount a borrower pays to a lender. Raising interests rates decreases the amount of people who are able to borrow money, thereby decreasing the money supply.
The increase demonstrates a commitment to a goal of 3% inflation.
“The increase of interest rates will guarantee to Colombians that there exists a promise to maintain the stability of prices which is a benefit to all,” Uribe said.