Colombia Outlook. First Quarter 2015.

The world economy continues to grow, albeit slowly and unevenly, with growth in the US offset by the weakness of Japan and the Eurozone. The risks to world growth continue to impose downward pressures. We expect to see GDP grow by 3.6% in 2015 and 4.0% in 2016. Public consumption and spending will assist growth this year. In 2016, the main driver of growth will be exports, while private consumption will experience a slowdown. Inflation will reach 3.5% by the end of 2015. As regards devaluation, the first six months of the year will see inflation at around 4%, though this will slow over the second half of the year as the economy slows down. The Bank of the Republic will cut its intervention rate by 50 basis points. This cut will be conditional on the projected inflation rate remaining absolutely on target over the long term. The central government deficit will stand at 2.8% in 2015, falling to 2.5% in 2016. Cyclical factors will mean that deficits will exceed the levels mandated by the Fiscal Rule. Despite the higher deficit figure, we believe that 2015 will be decisive in fiscal terms. Further tax reforms will be required in 2016, together with an adjustment in spending.

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