September 18, 2018 / 3:21 PM / in a month

Colombia economy to grow 3.5 percent in 2019; global trade pressures top risk: central banker

BOGOTA (Reuters) - Colombia will reach its growth potential of 3.5 percent next year as the economy fully recovers but will remain vulnerable to global trade pressures, new central bank board member Carolina Soto said.

Carolina Soto, co-director of the Central Bank of Colombia, poses for a photo in Bogota, Colombia August 31, 2018. Picture taken August 31, 2018. REUTERS/Luisa Gonzalez

Soto agrees with the bank’s technical team that gross domestic product will expand 2.7 percent this year, she told Reuters on Tuesday in her first interview since joining the board in July.

“We are a bit optimistic and we think it could be more. We’ll need to see what happens in the second half, if household consumption recovers a bit more, if public consumers keep boosting growth,” the 45-year-old economist said.

“I do think it will consolidate more in 2019. I think we’ll grow a minimum of 3.5 percent, if not more, pushed by mining, energy and construction,” Soto said in her Bogota office.

Although the recovery of the country’s principal commercial partners has been favorable, Colombia’s export figures are fragile, especially with the United States’ revision of trade deals, Soto said.

“There could always be eventualities. For instance, if these commercial tensions cause a new export crash - we’re still vulnerable in terms of exports,” she said. “The price of coffee doesn’t help and we still need to diversify more, so that’s where we’re vulnerable.”

Soto, who was a vice-finance minister during the previous government, said inflation would end 2018 at around 3.3 percent and next year at 3.2 percent, slightly above the bank’s long-term target of 3 percent.

The bank has held its benchmark interest rate at 4.25 percent since April, after making cuts of 350 basis points beginning in December 2016 in a bid to bolster economic recovery. Colombia’s GDP expanded 1.8 percent in 2017.

Soto, who described herself as orthodox and economically conservative, would not say how much longer the rate would be held.

“It depends on the rest of the factors, but at this point if the conditions don’t change, that stability in the rate should of course be maintained.”

Soto said that although Colombia is not in a “chaotic” situation, its fiscal position remains one of the top risks for Latin America’s fourth-largest economy.

The finance ministry has said the Andean country is facing an $8.6 billion budget shortfall, though Soto said she thought it was less.

“The top risk is fiscal - that we lose credibility in the management of public finances,” she said.

Reporting by Nelson Bocanegra; Writing by Julia Symmes Cobb; Editing by Dan Grebler

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