Forex Flash: Colombia to grow 3.5% in 2013 with the COP peso falling below USD $2,000 - Capital Economics

FXstreet.com (San Francisco) - In the last 10 years, Colombia has grown an impressive 4.7% GDP by year as average, in crisis-time the average was 4.4% yearly rise. According to the IMF previsions, Colombia is expected to rise 4.3% in 2012 and 4.4% in 2013 but the Capital Economics team believes that Colombia could grow slightly slower.

"The Colombian economy is on course to expand by an impressive 4.0% this year," comments the Economic Capital team in a recent outlook report. "But there are reasons to think that growth will slow in 2013."

Colombia has a "market-friendly government," and with the "restoration of national security and heavy investment into the natural resources sector means that the economic outlook is amongst the best in the region." But the "biggest risk is ‘Dutch disease’, which threatens the development of the non-resource sector," among that "recent growth has been supported by a construction boom."

Everybody knows now the advantages and problems of construction boom. "However, while we expect growth to slow next year, it is unlikely to collapse," points the team. Although lower commodity prices will weigh on domestic demand, "they will also relieve the upward pressure on the exchange rate. We think that the peso might fall to 2,000/$ next year, paving the way for an (albeit modest) pick-up in industry."

Colombia's GDO will advance by 4.0% in 2012, 3.5% in 2013 and 4.5% in 2014, according to Capital Economics. Meanwhile, inflation would remain controlled, 3.3% in 2012, 3.5% in 2013 and 3.0% in 2015.

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