Statement by an IMF Mission to ColombiaPress Release No. 10/42
February 16, 2010
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 two weeks as part of the periodical Article IV consultation process. The team held discussions with the authorities and the private sector about recent economic and financial developments, and the near- and medium-term outlook. The mission will prepare a report to be presented to the IMF Executive Board in April to conclude the Article IV consultation.
“The Colombian economy is showing signs of recovery. Economic activity improved in the second half of 2009 as countercyclical policies took effect and external conditions improved, despite the impact of lower trade with Venezuela. Inflation declined to 2 percent by end- 2009, as inflation pressures abated with the reversal of food price increases and weak aggregate demand. The external current account deficit declined as lower imports more than offset the drop in exports, and it was comfortably financed with official and private capital inflows.”
“Economic policies before and after the global crisis were appropriate to ameliorate the impact on Colombia. The central bank lowered its policy rate by 650 basis points since late 2008 and fiscal policy was countercyclical. The flexible exchange rate and the sound financial system were also instrumental in mitigating the effects of the external shocks.”
“Output growth is expected to pick up to about 2-2.5 percent in 2010 as monetary and fiscal policy remain supportive of domestic demand and the sound financial system provides a strong basis for a resumption of credit. Inflation is expected to rise due to temporary increases in food prices related to El Niño but nonetheless remain within the 2-4 target range during the year. The balance of payments position is expected to improve, with strong capital flows expected to more than cover the increase in the external current account deficit.
“Colombia’s public debt remains moderate, and is projected to decline over the medium term, as sustained growth resumes. Colombia has a strong institutional fiscal framework, and is well placed to strengthen it further by adopting a fiscal rule. The mission highlighted the international experience with fiscal rules, and welcomed the authorities’ plans to adopt one in the future.”