Colombia's Economy Seen Growing 5.6% In 4Q

Analysts expect economy to slow from 3Q

Median forecast for 2011 is for 5.8% GDP growth

Government expects economy expanded 6% in 2.011

The Colombian economy likely continued to expand at a strong pace in the fourth quarter of the year, fueled by its booming oil industry and more government spending on public infrastructure projects.

In the last quarter of the year Colombia's gross domestic product likely grew 5.6%, according to the median estimate of seven economists polled by Dow Jones Newswires. 

The estimates from the quarter ranged from 5.2% to 6.4%. For the full-year 2.011, the median estimate stands at 5.8%.

If accurate, the median forecast for the fourth quarter would represent a slowdown from the third quarter, when the economy expanded 7.7% from the year-earlier period. 

The slower growth in the quarter would be partly the result of the central bank's efforts to cool off economic activity and fend off inflationary pressures.

The central bank started to hike its benchmark lending rate last year, which stands at 5.25%.

"It's a modest deceleration from the previous quarter that reflects the tighter monetary policy by the central bank," said Alejandro Arreaza, an economist with Barclays Capital.

Colombia's economic growth is being fueled by consumer demand. 

The oil and mining sector, which account for 7% of Colombia's GDP is growing at a fast clip, driven by higher prices for crude. According to Interbolsa SA, Colombia's largest brokerage, that sector likely grew 20% in the fourth quarter.

Oil represents about 40% of Colombian exports. 

In the last quarter of the year, revenue from sales abroad was boosted by a temporary weakening of the peso against the dollar. 

Since the start of this year, however, the peso has strengthened sharply against the dollar.

That strengthening of the peso, and the reliance on the oil sales abroad, is hurting some sectors of the economy. 

For 2.011, industrial production climbed 4.9% from a year earlier, lagging other economic indicators. 

Retail sales expanded 10.3% in the quarter, fueled by consumer demand.

The government, meanwhile, is slightly more optimistic about the 2.011 growth figures. 

Finance Minister Juan Carlos Echeverry has said he expects the economy grew 6% for the full-year 2011. 

For this year Echeverry has said the economy will grow about 5.5%.

The government has also increased spending in public works to deal with the impact of torrential downpours in the last months of 2.010 and also in 2.011. 

Most analysts expect that spending to generate more economic growth.