© Reuters. FILE PHOTO: A man walks with a shopping cart through the Paloquemao market square, amid inflation reaching the highest figures in years, in Bogota, Colombia October 7, 2022. REUTERS/Luisa Gonzalez/File Photo

By Nelson Bocanegra

BOGOTA (Reuters) – Colombia’s economy will have grown significantly for the second consecutive year in 2022, but expansion will slow sharply this year on high interest rates and persistent inflation, a Reuters survey showed on Thursday.

The South American country’s gross domestic product will have grown 7.9% last year, according to the median estimate from 19 analysts, falling from the 10.8% it reached in 2021 on recovery from the coronavirus pandemic.

Estimates from those polled were between 7.8% and 8.3%, broadly aligned with expectations from the government and the central bank, which predict full-year growth of 8%.

The DANE statistic agency will publish the figure on Feb. 15.

“A good portion of growth was the reflection of soaring domestic demand which was sustained in large part by credit and which only began to diminish at the end of the year, when the contractive monetary policy of the bank began to take effect,” said economic think tank ANIF in a report.

During the fourth quarter, Colombia’s economy will have registered growth of 4%, analysts predicted, a reflection of slowing expansion that is likely to continue on interest rate increases.

“Economic activity in Colombia surprised to the upside in 2022 despite high inflation and central bank tightening for most of the year. But good things rarely last in Latin America,” said Andres Abadia, chief Latin American economist at Pantheon Macroeconomics.

“Recent data confirm that growth is slowing on a sequential basis, as increased political and policy uncertainty, high inflation, and elevated financing costs finally take a toll,” he added.

The central bank has raised borrowing costs by a total of 1,100 points to 12.75%, its highest rate since November 1999, as inflation climbed to a high of 13.25% in the 12 months through January.

The economy will expand 1.05% this year, those surveyed said, a prediction well above the central bank’s technical team, which revised down its prediction to 0.2% in January.

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