Colombia’s economy could expand 4.5% in 2010

The Colombian government is preparing to lift its economic growth target for the year, a reflection of a strong recovery that could result in a 4.5% increase in gross domestic product this year.

Hernando Gomez, the head of the National Planning Department, said Thursday that the economy could expand 4.5% this year, a figure substantially higher than then current official 3% target.

A new official estimate will likely be announced once the second-quarter economic results are published in September, Gomez said.

The new estimates will likely bring the government’s official forecasts in line with those of the central bank, which expects the economy to expand between 3.5% and 5.5% in 2010.

The higher growth estimates point to a faster economic recovery than the government’s initial 2.5% forecast at the beginning of the year. Finance Minister Juan Carlos Echeverry said Wednesday that Colombia could grow 5% this year.

Strong growth in consumer demand, as well as solid figures in manufacturing and retail sales, is behind the improved economic outlook. In the first half of the year, retail sales rose 9.8% from a year earlier, while industrial output climbed 5.8%.

The central bank said earlier this month said that it expects second-quarter economic growth to come in between 4.3% and 5.5%, with “4.9% as the most probable figure.”

Colombia’s faster economic growth this year, after climbing a tepid 0.8% in 2009, hasn’t created inflationary pressures yet. The consumer price index decreased 0.04% in July as food prices dropped 0.5% from July 2009. Food prices account for 28% of the CPI.

Colombia’s 12 month-running inflation rate stands at 2.24%, the lower range of the central bank’s inflation target of 2% to 4%. (Darcy Crowe / Dow Jones Newswires)

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