Press Release No. 09/237

Press Release No. 09/237
June 26, 2009

An International Monetary Fund (IMF) mission headed by Mr. Marco Piñón, Advisor in the Western Hemisphere Department, issued the following statement today in Bogotá:

“An IMF team has been in Colombia over the past week for a semi-annual visit, ahead of the annual Article IV consultation to be held later in the year. The team held discussions with the authorities and the private sector about recent economic and financial developments, and the near- and medium-term outlook.

“Colombia has weathered the global financial crisis well, although the effects of the global economic slowdown are being felt. The economy has been affected by lower external demand, commodity prices, remittances, and Foreign Direct Investment flows. As a result, GDP growth decelerated in the first half of the year. A recovery is expected for the second half, as the global economy starts to pick up and countercyclical policies take effect. With the reversal of food price increases and weak aggregate demand, inflation pressures have abated and inflation is now expected to fall to near four percent. The external current account deficit has increased owing to a drop in exports, but has been partly offset by lower imports and, given Colombia’s continued access to capital markets, has remained financed.

“The authorities responded appropriately to the global shock and ensuing economic slowdown. They secured sufficient external financing early on and, as conditions improved, have prefinanced public debt obligations for 2010. They also took preventive steps to ensure adequate liquidity in the financial system. To offset the economic slowdown, the central bank has lowered reserve requirements and its policy rate by 550bp since late December, and automatic fiscal stabilizers have been allowed to work. Continued exchange rate flexibility has also helped the economy adjust to external shocks.

“Looking into 2010 and the medium term, staff believes that Colombia should be in a position to gradually resume sustained growth, and reduce its fiscal deficit and public debt. The recently released medium-term fiscal framework is consistent with these goals, and the mission encouraged the authorities to take advantage of any improvement in world growth and commodity prices to further improve its fiscal position.”