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Colombia finmin expects slower 2012 growth, wants rate cut
July 25, 2012 / 2:33 AM / 5 years ago

Colombia finmin expects slower 2012 growth, wants rate cut

BOGOTA, July 24 (Reuters) - Colombian Finance Minister Juan Carlos Echeverry said on Tuesday that the Andean country would grow more slowly than expected in 2012 at 4.5 percent versus 4.8 percent previously, hit by falling growth in agriculture and industry.

Latin America’s No. 4 economy expanded at a brisk 5.9 percent last year but growth in 2012 is expected to take a hit from the global economic slowdown, a year-long series of rate hikes in Colombia, and poor performance in the second quarter.

“We can’t be complacent. We need measures that help the economy in precisely the next six or 12 months. Sectors where such measures must be more effective are agriculture and industry. I see the other sectors growing well,” he said.

“That’s why the government has the feeling that a more competitive exchange rate (and) an interest rate that at some moment could begin to go down could help the economy a lot, in particular agriculture and industry,” he told journalists.

Colombia’s economic growth rate likely slowed in the second quarter to between 4.3 percent and 4.5 percent versus 4.7 percent in the first quarter, said Echeverry, who is also a member of the central bank’s board of directors.

The monetary authority - which is meeting on Friday to decide on the benchmark interest rate - is also expected to lower its 2012 economic growth estimate, most likely tightening the current 4 percent to 6 percent range.

A Reuters poll of analysts on Tuesday showed that 31 out of 40 believed the bank’s board would keep the rate at 5.25 percent for the fifth consecutive month since credit growth remained high and economic data were somewhat mixed.

Nine analysts saw the rate being cut by 25 basis points.

The majority of experts believed the bank would not raise the amount of daily dollar purchases from the current $20 million or more.

Colombia has been battling against the impact of a strengthening peso, which has damaged export competitiveness.

The country has attracted record foreign investment in the past decade as a military offensive against rebels made it safer to do business.

The influx of dollars, coupled with attractive yields compared with near-zero interest rates in developed economies, has bolstered the value of the peso 8 percent so far this year.

Exporters such as flower and coffee growers have suffered from a strong currency because they pay costs in pesos but receive dollars for their sales.

Echeverry reiterated a government call that the bank could buy more reserves to put pressure on the peso, which has become the world’s strongest gaining currency.

“Reserves should be around $50 billion. Today they are $34 billion so there is space to buy and increase reserves,” he said citing the findings of a technical document by the finance ministry.

Writing by Jack Kimball; Editing by Eric Meijer

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