Colombian economy grapples with global financial crisis
- Source: Xinhua
- [14:49 July 07 2009]
- Comments
The National Statistics Department of Colombia said on June 25 that the country's economic growth in the first quarter of the year contracted 0.6 percent.
Since it was the second consecutive quarterly decline, Colombian Finance Minister Oscar Ivan Zuluaga said the country's economy has technically plunged into recession.
Zuluaga said on June 16 that the government lowered its forecast of economic growth for 2010 to 2.5 percent, down from the previous estimation of 5 percent.
The government also estimated that the country's gross domestic product (GDP) will grow by 0.5-1.5 percent this year, lower than the previous forecast of 3.5 percent.
He said the decline in production and export, the contraction of consumption and the rising unemployment in Colombia, which were caused by the global financial crisis, were the main reasons for the economic recession in the country.
Statistics showed that the industrial production in April decreased 14.5 percent, hitting a record low in ten years. Furthermore, the unemployment rate rose to 12.1 percent in April. As many as 2.54 million Colombians were out of work, 211,000 more than the same month last year.
In the first four months of this year, the export volume dropped 17.3 percent. Analysts said the decline in traditional export markets like the United States was the key factor that drove Colombia's export down. The export to the United States fell by 30.1 percent in the first quarter.
Besides, the appreciation of Colombian currency peso against the US dollar in recent months also affected the export of Colombia.
Considering the low-level globalization of Colombia's economy, analysts suggested that Colombian companies explore new markets in the world and diversify their exports to counter the impact of the crisis.
In order to promote external trade, the Colombian government is seeking to clinch a Free Trade Agreement with the United States. Meanwhile,
Colombia, together with other Andean countries, has held several rounds of trade negotiations with the European Union. The Colombian government is also strengthening economic cooperation with Brazil, Peru and other Latin American countries.
The Colombian central bank has cut the basic interest rate for seven times since last December to prevent the crisis from further deepening and to boost economic growth. The total reduction of the key rate reached 5.5 percentage points.
Whereas the inflation rate has fallen for eight consecutive months up to June, the central bank forecast that the rate will continue falling in the next six months.
Colombia is one of the major coffee producers and exporters in the world, and coffee export has become the third largest foreign exchange earner for the country. The coffee industry has created the most job opportunities in Colombia.
However, the coffee production and export of Colombia fell by 17 percent and 24 percent respectively in the first five months of this year due to the long winter and insufficient fertilization.
Under such circumstances, the government raised coffee's basic selling price and provided interest-free loans and discounted fertilizer to medium and small-sized coffee planters to protect their interests.
The National Coffee Producer Federation also invested a large amount of money to advertize Colombia's coffee products in the world in order to expand the international market.
Zuluaga told local media that the Colombian government had the ability to confront the impact of the global financial crisis, and its measures are taking effect gradually, which will ease the recession in the country.
Moreover, as the fiscal revenue has been declining, the government is considering issuing treasury bonds worth 1.5 billion US dollars to finance its expenditure.
The International Monetary Fund (IMF) said that the Colombian economy will recover in the next six months and resume sustained economic growth in 2010. The IMF has decided to provide a loan of 10.5 billion dollars to Colombia to help it cope with the crisis.