An employee counts Colombian pesos at a store in Bogota, Colombia, December 28, 2018. Photograph: Luisa Gonzalez/Reuters. Obtaining licensing rights
BOGOTA (Reuters) – The Colombian government and industry associations called on the central bank to cut interest rates on Monday and urged business leaders to resume investment decisions in a bid to support the economy.
Latin America’s fourth-largest economy grew by 0.3% in the second quarter, much lower than expected. The central bank expected growth of 0.9% for 2023, which is much lower than the growth of 7.3% last year.
“We need to revive the economy,” Finance Minister Ricardo Bonilla said in a statement after meeting with Colombia’s major business associations. “What are we missing? Creating the financial conditions so that we all move in the same direction.”
From April to June, private investment in Colombia fell by 24% compared to the same period of the previous year.
Companies should not postpone investment decisions, said Jonathan Malagon, president of the Colombian Banking Association, Asubancaria, adding that borrowing costs are expected to fall amid lower interest rates in the future.
“Let’s not postpone, let’s not give up, let’s not give up, liquidity conditions in the Colombian economy are on the rise,” he said.
Interest rates in Colombia have reached their highest levels in a quarter-century, pushed up by the global inflationary shock that followed the coronavirus pandemic.
The central bank kept its benchmark interest rate steady at 13.25% in its last two interest rate meetings, after increasing it by 1,150 basis points between September 2021 and April 2023 to deal with inflation.
Both business leaders and the finance minister called on the central bank to start cutting interest rates.
“We believe that there are several conditions that allow us today to consider a path to lower interest rates – which we hope will begin relatively soon,” said Bruce McMaster, president of the Colombian business association ANDI.
Most analysts expect the first cut of the benchmark interest rate to come in September or October.
Reporting by Nelson Bocanegra and Carlos Vargas Writing by Oliver Griffin Editing by Rosalba O’Brien
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