August 15, 2017 / 4:39 PM / a year ago

UPDATE 1-Colombia's economy grew 1.3 pct in Q2 vs year before

(Adds background, additional figures)

BOGOTA, Aug 15 (Reuters) - Colombia’s economy grew 1.3 percent in the second quarter compared with the same period a year ago, the government said on Tuesday, slightly less than expected by the market.

Analysts said in a recent Reuters survey they expected 1.4 percent expansion, while the Finance Ministry had predicted 1.3 percent.

Policymakers in Latin America’s fourth-largest economy continue to grapple with slowing gross domestic product growth, sparked by the global drop in oil prices, and the effects of previously high inflation.

The government’s DANE statistics agency revised its first-quarter growth figure to 1.2 percent from 1.1 percent, meaning the Andean country grew 0.7 percent in the second quarter compared with the first.

Growth for the first half of the year was 1.2 percent compared with the same period in 2016.

Tough times continued for the oil and mining sector, which contracted by 6 percent during the quarter. Manufacturing fell by 3.3 percent.

The agriculture and finance sectors showed the most growth, of 4.4 percent and 3.9 percent respectively, DANE said.

The central bank board made a sixth consecutive interest rate cut last month in a bid to boost expansion, while 12-month inflation has fallen to 3.4 percent, within the bank’s 2 percent to 4 percent target range, after reaching nearly 9 percent in 2016.

The seven-member board has cut 225 basis points from the benchmark rate since the trimming cycle began in December, leaving it at 5.50 percent last month.

There could be scope for further rate cuts because the 3.4 percent inflation figure may point to consumer prices ending the year within the target range, board member Jose Antonio Ocampo told Reuters in an interview last week.

Even though Ocampo expects inflation to pick up again to slightly below 4 percent, he is the first board member to publicly predict the figure will be within the target range at the end of 2017.

The bank expects GDP growth of 1.8 percent this year, while analysts have predicted 1.6 percent expansion, both well below the government’s 2.3 percent target.

Colombia’s economy expanded 2 percent in 2016. (Reporting by Nelson Bocanegra and Julia Symmes Cobb; Editing by Meredith Mazzilli)

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