Colombia central bank lowers GDP projection, inflation to be above target

BOGOTA (Reuters) - Colombia’s central bank has lowered its economic growth prediction for this and next year, placing its expectations well below the government’s, and said inflation in 2019 will exceed the long-term 3% target.

The new prediction of 3% gross domestic product growth, due to weak external demand and internal consumption similar to last year’s, is far from government estimates of 3.6% and down significantly from the 3.5% previously projected by the bank.

The new estimates, outlined in a report published by the bank late on Monday, align with analysts who predicted in a recent Reuters’ survey that the economy will grow 3.15% this year.

“There is a worrying issue in terms of economic growth and the current account balance. What can be done to reactivate exports for me is a key issue,” central bank board member Jose Antonio Ocampo said at a event on Tuesday.

The bank estimates growth of between 3.2% and 3.3% in 2020, a chart in the report showed, “taking into account the negative effects of greater global uncertainty about investment decisions” and a fall in consumption.

The Andean country’s government has predicted growth of 4% next year, after expansion of 2.6% in 2018.

Meanwhile, the bank said inflation would only move toward the target in 2020.

According to graphics in the report, the bank projects inflation will end this year between 3.6% and 3.7%.

The country is “not facing a serious problem with inflation,” Ocampo added.

Bank board chief Juan Jose Echavarria will present the bank’s quarterly inflation report on Aug. 12.

The change in projections mean the board is ever more likely to hold the interest rate at 4.25% through the end of the year, as analysts expect.

Reporting by Nelson Bocanegra and Carlos Vargas; Writing by Julia Symmes Cobb; Editing by Richard Chang