June 18, 2020 / 5:10 PM / 15 days ago

UPDATE 2-Colombia economy to contract closer to 7% on coronavirus, central banker says

(Recasts with comments from central banker)

By Nelson Bocanegra and Oliver Griffin

BOGOTA, June 18 (Reuters) - Colombia’s economic contraction this year will be closer to 7% because of a more prolonged fall-out from the coronavirus pandemic than previously expected, central bank board member Ana Fernanda Maiguashca said on Thursday.

The government’s statistics agency said earlier on Thursday the economy contracted 20.06% in April versus the same month last year, the largest fall on record.

The prediction puts Maiguashca on the less optimistic end of central bank technical team predictions for contraction between 2% and 7%. The government has predicted a shrinkage of 5.5%.

President Ivan Duque declared a national quarantine in late March. Though some restrictions have lifted, lockdown is set to last until July 1.

“I would be closer to -7%, but not because Colombia has worsened in comparison to its peers, but because I think in a way we have understood this will last longer than we all thought originally,” Maiguashca said during a virtual conference.

Second-quarter economic results will be “brutal” she said.

The central bank board cut 150 basis points from the interest rate between March and May.

The collapse of GDP in April was much higher than the 4.9% drop seen in March, statistics agency DANE said.

The tertiary sector - made up of retail, public services, restaurants, bars, accommodation and transport - shrank 9.2%, the agency said. Tertiary economic activities overall account for some 67% of the economy.

Extractive industries, including oil and mining, collapsed 13.75%, while manufacturing and construction fell by 50.12%.

The Andean country’s economy grew 1.1% in the first quarter of the year, after robust expansion in January and February was offset by the start of pandemic measures in March. Thousands of businesses have shuttered, unemployment has spiked and the government has abandoned its fiscal deficit limits for 2020 and 2021. (Reporting by Nelson Bocanegra and Oliver Griffin; writing by Julia Symmes Cobb; editing by Jonathan Oatis and Leslie Adler)

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