Colombia’s diversified economy will enable it to grow faster than most Latin American countries next year, even after oil prices slumped, Finance Minister Mauricio Cardenas said.
Oil accounts for just 16 percent of the central government’s revenue, Cardenas said in a phone interview from Antioquia province, Bloomberg reported Saturday.
“Colombia is much less fiscally dependent on oil than other oil exporting countries and the reason is that Colombia has a much more diversified source of tax revenue,” Cardenas said. “In a nutshell, what we will have next year is a much more balanced growth across sectors of the economy.”
The government lowered its 2015 growth forecast to 4.2 percent from 4.8 percent this week, while maintaining its 4.7 percent target for this year. The reduction came after the price of crude, which accounts for about 55 percent of exports, fell 48 percent in the past six months.
Investors should differentiate Colombia from other oil exporting countries that are more dependent on oil revenue, Cardenas said.
The peso has weakened 15 percent in the past three months to 2,367.35 per dollar, making it the worst performing emerging market currency after the Russian ruble. Yields on Colombia’s benchmark peso bonds due 2024 have increased 46 basis points, or 0.46 percentage point, to 7.15 percent, according to data from the central bank.
Fiscal Deficit
President Juan Manuel Santos said earlier this week that the country is prepared for a nine trillion-peso ($3.8 billion) shortfall in 2015 due to lower oil prices. The government is aiming to reduce its structural deficit to 1.9 percent of gross domestic product by 2018, from 2.3 percent this year.
A tax bill approved this year by Congress will allow the Andean nation to have the “necessary revenue to keep public investment at the current levels and at the same time comply with the fiscal rule despite the reduction in oil prices,” Cardenas said.
“This is crucial, this is what makes Colombia different,” he said.
Analysts surveyed by Bloomberg expect Colombia’s GDP to grow 4.3 percent next year, compared to 3.4 percent in Mexico, 2.9 percent in Chile and 0.9 percent for Brazil. Only Peru, with an estimated 4.8 percent expansion, is forecast to grow more among major Latin American countries.
The manufacturing industry will lead growth in 2015 with a 4 percent expansion as it benefits from the weaker peso, faster US growth and strong domestic demand, Cardenas said. Financial services, tourism, telecommunications and transport will also post “robust” growth, he said.
