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COLOMBIA RECESSION ENDS WITH 2.5% FOURTH-QUARTER GROWTH

By NBF NEWS
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Colombia's economy pulled out of its first recession in a decade in the fourth quarter as local demand picked up amid easing of the global credit crunch, Bloomberg reported on Thursday.

Gross domestic product expanded 2.5 per cent from a year earlier, the first growth in a year, beating the median estimate of 1.7 percent in a Bloomberg survey of 31 economists. Gross Domestic Product rose 1.1 per cent from the third quarter while for 2009 overall, the economy grew 0.4 per cent, down from a revised 2.4 per cent in 2008.

'The worst is now completely behind,' said head economist at BBVA, Ms. Juana Tellez, Colombia. 'There is going to be a sustained recovery, but not a quick one.'

To spur growth in Latin America's fifth-biggest economy, the government has invested in infrastructure projects and attracted foreign investment while policy makers have slashed interest rates from a record 10 per cent in November 2008 to 3.5 per cent now.

Bank lending picked up and consumers spent more on big-ticket items like cars and washing machines.

'Public works have been key to avoiding a greater deterioration of GDP,' said Daniel Nino, head of research at Bancolombia SA, the country's biggest bank. 'Infrastructure has lifted the economy.'

Public and private infrastructure spending this year may rise to $26.3bn, of which the government will invest 23 trillion pesos, according to the president's office.

Colombia last year spent 46.5tn pesos on public works, of the government's goal of 55tn pesos.

Colombia's growth rate may not be as fast as expected this year and the economy may 'underperform,' Nomura Holdings Incorporated Strategist, Mr. Tony Volpon wrote in a report dated March 23.

He lowered his 2010 economic growth forecast to three per cent from 3.3 per cent previously.

A budget deficit and sluggish job creation are an 'impediment' to growth, Volpon said in the report. The government has targeted a consolidated budget deficit this year of 3.7 per cent, up from 2.7 per cent last year.

The central government deficit will rise to 4.5 per cent from 4.1 per cent last year, Finance Minister, Mr. Oscar Zuluaga said in January.

'The outlook for the deficit, much like other key variables, depends largely on the outcome of upcoming presidential elections, as any hope for structural reforms and a normalization of the relationship with Venezuela is seen as lying with the new president,' said Volpon.

A plunge in trade with Venezuela has contributed to the weak economy, said Alberto Bernal, head of emerging-markets research at Bulltick Securities Corporation in Miami.

Venezuelan President Hugo Chavez pledged in July to end imports from his neighbor in response to a deal to allow the United States armed forces access to seven Colombian military bases.