Colombia cenbank sees 2013 growth up to 4.2 pct, low inflation

Tue Oct 1, 2013 3:18pm EDT

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By Nelson Bocanegra

BOGOTA, Oct 1 (Reuters) - Colombia's central bank chief Jose Dario Uribe said on Tuesday he sees economic growth of 4 percent or slightly more this year after a strong second quarter while inflation will likely come in below the mid-point of the bank's target range.

Vastly improved security after a U.S.-backed offensive against the country's left-wing guerrillas in the last decade has led to a wave of foreign investment focused on the mining and oil sectors.

Uribe said growth in the second quarter of the year had been surprisingly strong at 4.2 percent, accelerating from 2.8 percent in the prior three months, and he was expecting a "significant" expansion in the second half of the year.

"For the whole year the Colombian economy could grow between 4 (percent) and 4.2 percent," he said during a Senate debate.

The forecast is more conservative than the government's 4.5 percent estimate. The central bank said in August it saw growth for this year at between 3 percent and 4.5 percent, with full-year growth most likely at 4 percent. Colombia's economy expanded 4.2 percent in 2012.

Low inflation has been one of the main variables guiding the central bank's policies, giving it room to gradually trim 200 basis points from the benchmark inflation rate between July 2012 and March 2013 to its current level of 3.25 percent.

"We're expecting a number on average slightly below the inflation target, around 2.4 or 2.5 percent. With this we will reach more than four straight years with average inflation just below 3 percent," Uribe said.

The central bank's inflation target range is 2 percent to 4 percent with a mid-point of 3 percent.

Colombia has maintained buoyant growth in the last few years even as expansion in other South American countries like Brazil slowed. Agriculture, construction and mining were among the fastest-growing sectors in the second quarter.

A rebound in coffee production after a run of bad crops helped the farming sector's performance. As the world's top exporter of gourmet coffees, Colombia earns a premium for its beans over and above the reference futures contract price.

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