* Beats market expectations
* Economists expect interest rates to go lower
(Adds economist, analyst reaction; links to companion stories)
By Helen Murphy and Nelson Bocanegra
BOGOTA, March 21 Colombia posted
better-than-expected growth last year even as weaker public
investment and manufacturing bit into expansion and increased
the likelihood policymakers would cut interest rates to spur the
The Andean nation's gross domestic product grew 4 percent
last year - much lower than the revised 6.6 percent in 2011 -
but above analysts' expectations of 3.6 percent. Growth slowed
in the fourth quarter to 3.1 percent from 6.6 percent in the
same period a year ago, according to the statistics agency,
While better than the market had forecast, the slower pace
may give the central bank an excuse to cut its benchmark
interest rate for a fifth straight month at its meeting on
"The bank will likely take more into consideration the
fourth quarter against the third to determine whether there is a
recovery or continued slowdown," said Camilo Perez, chief
economist at Banco de Bogota.
"Just with the data from January and February of this year,
it's enough to think the interest rate could go to a historic
low of 3 percent," Perez said.
The economy grew 1.8 percent in the fourth quarter from the
previous three months, the statistics agency said.
Industrial output and retail sales, along with exports and
construction data, have raised concern in recent months that the
economy is slowing more than previously thought. Central bank
chief Jose Dario Uribe expressed concern consumer confidence is
also beginning to wane.
"Looking at the quarter the industrial sector is suffering -
supported by other macro data - but at least we had some kind of
recovery in construction," Valores Bancolombia analyst Rupert
Stebbings said in a brief note to investors.
"The word solid would define almost all the sectors."
Manufacturing fell 3.1 percent during the quarter, in line
with several months of poor industrial output data, while
construction rose 5 percent and mining was up 1.5 percent, the
statistics agency said.
For the full year, construction rose 3.6 percent, way lower
than the 10 percent increase in 2011, while manufacturing swung
to a decline of 0.7 percent compared with 5 percent growth in
2011. Mining rose 5.9 percent in 2012, well off the 14.4 percent
increase the previous year.
Some economists suspect the better growth came as a result
of a change in the methodology used to measure investments in
"Clearly the improved result is because of the change in
methodology," said Andres Duarte, economist at Bogota-based
brokerage Asesores en Valores.
"Still the data is well off potential economic growth and I
don't believe the central bank will change its posture because
of this data."
CENTRAL BANK RATE CUT?
A majority of economists expect the bank to cut its interest
rate on Friday to help kick start the economy and bring it back
up to the government's target of "sustained" 5 percent annual
Policymakers have already cut the overnight lending rate by
150 basis points since mid-2012 to its current 3.75 percent, the
lowest in Latin America.
Inflation at the bottom of the 2 percent to 4 percent target
range has allowed such expansionary monetary policy.
"If the central bank continues its tendency of cutting the
interest rate, it will have an important effect on the economy
from the point of view of internal demand," said Jorge
Bustamante, head of the DANE statistics agency after announcing
Finance Minister Mauricio Cardenas had said full-year growth
would be between 3.8 percent and 4 percent. The central bank
forecast the economy would post growth of between 3.3 percent
and 3.9 percent.
For 2013, the government expects 4.8 percent GDP while the
bank is less optimistic and sees expansion of about 2.5 percent
to 4.5 percent.
Colombia will announce data for industrial output and retail
sales on Friday after the central bank policy meeting.
(Reporting by Helen Murphy; Editing by Leslie Gevirtz)