Inflation looms in Colombia.

Worries about government spending and inflation dominate the analysis of Colombia's economy for 2007.

In January 2007, the Los Angeles Times (Los Angeles) was writing about the "brisk" growth of the Colombian economy (January 1, 2007) saying that the country's assets were appreciating because of the confidence of foreign and domestic investors. Among the appreciating assets is housing-good news for Colombians who can afford to be home owners.

By the end of February 2007, Bloomberg News was reporting a rise in the country's overnight interbank rate imposed by the Bank of the Republic of Colombia (Banrep), the country's central bank. In it's February 27, 2007 distribution, Bloomberg said that the rate hike to 8.0 percent was, "A five-year high, as the country's fastest economic growth in almost three decades threatens to ignite a surge in inflation." Increased consumer spending created by improved personal security was cited as the cause of the surge along with investment.

The current increase in consumer spending is not necessarily a positive sign for the medium term. Spending suffered during the years when violence plagued Colombian street life. The increase in spending may be more a sign of pent up demand than an improvement in the financial stability of Colombian households.

An economist quoted in the LA Times story said that the Colombian economy was not creating jobs fast enough. The economist said, "The `stagnation' of job creation was the government's biggest challenge and that it loomed as a major factor in Colombia's social problems."

A March 11, 2007 Associated Press (AP) filing commented that government spending-a growth stimulant-was unusually high. The story quoted a New York analyst as saying, "You have to wonder what happens when growth cools."

The precarious position of Colombia's consumer sector is illustrated by per capita income and GDP being equal, an average of 2.6 percent per year since 1996, according to International Monetary Fund (IMF) statistics.

INFLATION AND JOB CREATION ARE IMPORTANT ISSUES IN COLOMBIA

The population growth rate for Colombia is slightly below the regional average, due in part to a birth rate of 20 per thousand inhabitants, which is lower than the average of 21 per thousand for South America. Job creation has not kept up with growth of the labor force in recent years, and it is unlikely that the situation will improve further in 2007. Unemployment is running about 11.1 percent, and this continues to undermine consumer confidence.

Colombia's population reached 47-million people mid-2006, which amounted to just over 12 percent of South America's 378-million inhabitants. According to data released by the Population Reference Bureau (PRB), Colombia's population will reach 58-million by 2025. Also, according to that source, Colombia is going to have a population of 66-million people in 2050.

The PRB revealed that a substantial 75 percent of Colombia's population lived in urban areas during 2006, and that the country's population density is 106 people per square mile. Another source of demographic data, the CIA's World Factbook, indicates that 30 percent of Colombia's population was birth to 14 years old in 2005, while 65 percent was 15 to 64 years old, and 5 percent of the populace was 65 years of age and over.

CIA statistics revealed that the country's population growth rate was 1.46 percent in 2006. According to the United Nations Population Division, in the year 2050, 20 percent of Colombia's population will be birth to 14 years old, while 58 percent will be aged 15 to 59, and 22 percent of the populace will be 60 years of age and over.