Country Economic Forecasts > Colombia

GDP growth slowed to 2% y/y in Q2, down from 2.5% in Q1, as the oil and gas sectors remained depressed because of low investment after the slump in commodity prices. In addition, tighter monetary and fiscal policies, and high inflation, are also taking their toll on the real economy. We have lowered our GDP growth forecasts for 2016 and 2017 to 2.3% and 2.9% respectively, down from 2.6% and 3% previously. However, we continue to expect that growth will accelerate in the coming years back towards the country's potential output growth rate of just over 3.5%.Inflation has remained stubbornly high, reaching 9% in July, the highest for almost 16 years. Nevertheless, we do not expect further rate hikes from BanRep during the rest of 2016, as the economy has clearly weakened this year and inflation is expected to start falling in the next few months.The government and the FARC have signed a peace accord after four years of negotiations and 50 years of civil war. The agreement has now to be approved in a plebiscite on 2 October. The plebiscite (the 'yes' vote is currently running more than 10 points ahead of the 'no' vote in the polls) will be quickly followed by a fiscal reform, which the government hopes to get approved before the end of the year.