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IMF says Colombia 'well placed' to face challenges
* IMF sees "generally positive" 2010 outlook for Colombia
* Financial system held up well under 2009 global strains
BOGOTA, March 31 (Reuters) - Colombia's strong policy framework has helped protect its economy from the global slowdown, setting the stage for a "generally positive" 2010 outlook, the International Monetary Fund said on Wednesday.
Bolstered by a healthy banking system, "Colombia is well-placed to confront the challenges posed by the still uncertain global outlook," the IMF said in its annual review of the country's economy.
Monetary and fiscal policies should remain broadly supportive until there were clear signs of a sustained recovery in economic activity, the Fund said.
"Close monitoring of forward looking indicators of activity and inflation will be essential to guide the size and timing of the withdrawal of support," the IMF emphasized.
The Andean country's economy slowed in early 2008 after policies were tightened to address overheating during a 2004-2007 boom period as President Alvaro Uribe's security policies attracted international investment.
The global crisis caused private investment to collapse in the last quarter of 2008.
"Monetary policy responded swiftly, with a 650 basis point reduction in the policy rate to 3.5 percent," the IMF said. "Fiscal policy also contributed to support demand."
Domestic demand began recovering in the second half of 2009, led by public investment and consumption, the IMF said. "The financial system did not experience major strains from the global crisis," it added.
Gross domestic product eked out 0.4 growth in 2009 and the government forecasts will speed up to about 2.5 percent this year. Inflation is expected by the market to stay within the central bank's target range of 2 percent to 4 percent for full-year 2010.
(Reporting by Hugh Bronstein; Editing by Bernard Orr)
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