(Adds changing interest rate forecast)
By Nelson Bocanegra and Peter Murphy
BOGOTA, June 19 Colombia's economy grew 6.4
percent in the first quarter compared with the same period last
year, the government said on Thursday, the strongest
first-quarter result since 2007 and well above analysts'
predictions of a 5.1 percent expansion.
The surprising reading is likely to reinforce expectations
the central bank will raise the benchmark interest rate on
Friday a further 25 basis points to 4 percent, following two
such increases at the bank board's last two meetings.
A Reuters survey earlier this week showed 20 of 23 analysts
expected a 25-basis point increase, but four of those 20 said on
Thursday they now expected a more aggressive 50-basis point
hike. The majority still foresaw a 25-point rise but said
further hikes were now more likely this year.
"Tomorrow's rise will still be 25 (basis) points, but this
surprise could decide the path for the central bank and extend
increases during the year, so projections will be revised," said
Oscar Jaulin, an analyst at the Serfinco brokerage.
The government also revised the full-year 2013 growth figure
upward to 4.7 percent from 4.3 percent previously.
The Andean economy has been accelerating fairly steadily
over the past year due to an expansionist monetary policy which
had held the benchmark interest rate at 3.25 percent for 13
months until the hikes began at the end of April.
Growth in the first quarter compared with the fourth quarter
of 2013 was 2.3 percent, said the national statistics agency
LAGGING SECTORS RECOVERING
Faster growth has begun to nudge up inflation which last
year was at its lowest level since 1955. Inflation is expected
to reach or slightly surpass the central bank's projection of
around 3 percent this year, the midpoint of its 2 percent to 4
percent target range.
Finance Minister Mauricio Cardenas said the government was
"cautiously" maintaining its growth forecast of 4.7 percent for
2014 despite the strong first-quarter result.
He also said the central bank would extend its dollar
purchase program beyond the end of June, when it was scheduled
to finish. The measure is aimed at taming the strengthening of
the peso, which policymakers say is too strong and
"The country is doing well economically. We've managed a
recovery in the sectors that were lagging - agriculture and
industry," he said.
Cardenas said Colombia's strong first-quarter growth made it
the fastest expanding economy in the world in the January-March
period except for China, bucking a slowdown that he said was
taking place in Latin America's larger economies.
Construction was by far the fastest-growing sector of the
economy, expanding 17.2 percent in the first quarter from a year
ago. The financial sector, agriculture and mining all grew
between 5.6 percent and 6.1 percent. The industrial sector grew
Higher coal output and coffee production also helped spur
(Reporting by Nelson Bocanegra; Writing by Peter Murphy and
Julia Symmes Cobb; Editing by Chizu Nomiyama, G Crosse and Paul