Colombia Calls for Interest Rate Cut and Business Investment to Boost Economy

Latin America’s fourth-largest economy grew 0.3% in the second quarter, much less than expected. The central bank forecast growth of 0.9% for 2023, well below last year’s 7.3% growth.

“We need to relaunch the economy,” Finance Minister Ricardo Bonilla said after a meeting with Colombia’s main business associations. “What are we missing? The creation of the financial conditions necessary for us all to move in the same direction.”

Between April and June, private investment in Colombia fell by 24% compared to the previous year.

Businesses should not postpone investment decisions, said Jonathan Malagon, president of Colombia’s banking association, Asobancaria, adding that lower borrowing costs amid falling interest rates are expected to come. the future.

“Let’s not postpone, let’s not give up, let’s not surrender, liquidity conditions in the Colombian economy are on the rise,” he said.

Colombian interest rates are at their highest level in a quarter century, due to the global inflationary shock that followed the coronavirus pandemic.

The central bank kept its benchmark interest rate at 13.25% in its last two meetings, after raising it by 1,150 basis points between September 2021 and April 2023 to keep up with inflation.

Business leaders and the finance minister both called on the central bank to start cutting the rate.

“We believe there are several conditions that allow us today to consider an interest rate reduction – which will hopefully begin relatively quickly,” said Bruce Mac Master, chairman of the business association. Colombian ANDI.

Most analysts expect the first benchmark rate cut to come in September or October.