Colombia Weekly

Colombia Weekly

Central bank publishes neutral minutes. Notwithstanding concerns about soft Q3 growth, the Colombian central bank board is confident that robust growth is continuing in H2 thanks to strong domestic demand, according to the minutes of the 26 October board meeting, released on Friday.

The minutes attribute the slowdown in Q3 activity, especially in exports and industrial production, to the weakness of external demand. Growth will be underpinned by domestic demand. Domestic demand growth is being supported by upbeat consumer confidence, a robust labour market and a strong financial system.

The minutes also note that the slower pace of growth is natural for a country slowing from above-trend to potential growth, a point we have noted in the past. The bank adjusted its 2012 growth projection to 3.7-4.9% from 3.0- 5.0% previously.

Some members of the board argued for a policy-rate cut, as inflation is anchored to the mid-point of the target and the economy remains vulnerable to external shocks. However, notwithstanding external risks, Colombia’s terms of trade and key commodity export prices remain strong.

Exports rebounded in September. Exports were 6.1% higher this September than in the year-ago period, following three consecutive months of year-on-year contractions. Petroleum and mining exports rose 4.9% y/y and accounted for 80% of September’s growth in overall exports. Exports of manufactured products also rose by 4.9% y/y. Our seasonally adjusted data show a strong 11.7% m/m surge in exports.

Oil output continues on an uptrend. Following four consecutive monthly declines in the April-August period, oil production rebounded for a second consecutive month in October. Output rose 4k barrels per day in October over September and 0.9% y/y. The Ministry of Energy and Mining attributed the production increase to normalization of the oil pipeline operation, as well as stabilization of production in various fields. Attacks by terrorist groups on oil fields, as well as protests, have been a major factor in hampering oil production this year.

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