THE International Monetary Fund (IMF) has forecast that the Colombian economy will remain buoyant as it continues to recover from the impact of the novel coronavirus pandemic.

In its findings from an Article IV consultation, the IMF concluded, “Colombia’s very strong policy frameworks and comprehensive policy response to the pandemic supported the economy’s resilience. A flexible exchange rate, central bank credibility under inflation targeting, effective financial sector supervision and regulation, a medium-term fiscal rule, and strong institutions have helped the country to withstand external shocks and promote economic growth.”

Following a 7.0 per cent contraction in gross domestic product in 2020, Colombia recovered in 2021 with growth of 10.6 per cent. The IMF anticipates “above-potential growth” of approximately 5.75 per cent for the South American country this year, “led by robust household consumption and continued recovery of investment and exports”.

Over the next two to five years, the fund estimates growth to fall in the region of 3.4 per cent.

With strong local demand, the IMF also believes that inflation will breach the four per cent cap set by the central bank of Colombia, ending 2022 at 6.75 per cent. Banco de la República, as the central bank is known, in February announced inflationary target of 3.0 per cent within a band of two per cent to four per cent.

As current global prices of commodity continue to rise, the country is expected to be able to benefit from a reduction in the current account of its balance of payments. Colombia exports petroleum, coal, coffee, gold, and bananas, with the United States of America, Panama and China its main trading partners.

However, the IMF warned that the country faces risks associated with the war in Ukraine, among other factors.

“While Colombia stands to benefit from higher hydrocarbon prices, rising and volatile international prices for food and energy, as well as more persistent disruptions in global supply chains, would exacerbate domestic inflationary pressures,” the IMF stated.

“Global financial market volatility arising from the conflict or the monetary tightening cycle in major economies could also create shocks to capital flows. New outbreaks of COVID-19 variants could lead to subpar or volatile growth in trading partners,” it continued.

In the meantime, directors of the IMF advised that the central bank of Colombia could consider measures to reduce inflationary pressures, emphasising that “policy decisions remain data-driven and accompanied by clear communication”.