Academic literature on the topic 'New Zealand Agricultural Credit'

Agricultural products are the source of 75 % of 'New Zealand's export eanings. During the 1970 's, the decline in New Zealand's terms of trade (prices of exports of wool, meat and dairy products having risen more slowly than those of manufactured imports), the loss of access to the British market, the rise of protectionism (notably in the EEC of which Great Britain is a member) have posed serious adjustment problems for New Zealand agriculture. However, the "Marshallien entrepreneur" that is the New Zealand farmer, backed up by the State (which centralises control of exports and credit), has risen to the challenge : as a result, production is being diversified and this has facilitated a re-orientation of exports toward countries outside the OECD area. It is the view of the author that such a policy in conformity with the concept of free-trade, permits a more optimistic outlook for the 1980 's.

This article talks about New Zealand's biotechnology strengths, general trends and opportunities in New Zealand. It touches on nutrigenomics, nutraceuticals, biomedical, agricultural, clinicalt rials, bio-prospecting, bio-secuitry and NZBio.

In 2008, New Zealand’s gross domestic product (GDP) was four times the size of Uruguay’s, and its export earnings were five times Uruguay’s. Nevertheless, agricultural products accounted for over 60% of export earnings for both economies. This highlighted the importance that the agricultural sectors of Uruguay and New Zealand had to their respective foreign trade sectors. The success with which both countries’ agricultural sectors solved their financial needs would be influential to their export sectors and overall economies. Through the use of expert interviews, a multiple-case study strategy was employed to carry out a comparative study of the agricultural financing systems of Uruguay and New Zealand. The findings revealed contrasting situations in both countries. Chief among them were the differences encountered in agricultural debt relative to agriculture’s contribution to total GDP in each country. In Uruguay this figure was 26% whereas in New Zealand it amounted to almost 400%. The differences found were largely attributable to the institutional frameworks in place in each country (i.e. the legal and cultural norms that structure political, social and economic interactions), as well as the historical contexts in which the institutions evolved. In Uruguay, the institutional framework limited producers’ possibilities of accessing bank credit due to restrictive central bank regulations. The lack of access to international credit markets by Uruguayan banks due to the country’s unfavourable credit risk rating was an additional factor which limited credit availability. These were largely a result of the financial crisis (and the subsequent recession) that had occurred in the region in 2002. Producers in Uruguay were able to access costlier seasonal capital and some medium-term capital from informal lenders such as cooperatives, processors and input suppliers. Nevertheless, if they required medium and long term credit, Uruguayan farmers needed to deal with the banking system. Furthermore, the high cost of registering mortgages, combined with long-term loan facilities that generally did not go for longer than ten years, resulted in a limited demand for high-volume, long-term credit on producers’ side. Almost the exact opposite situation was found in New Zealand. No great financial turmoil had affected New Zealand since the economic reforms of 1984, in which the economy in general was deregulated. An institutional framework which promoted access to credit, combined with a favourable country credit risk rating which promoted open access to overseas funding for banks, meant that the agricultural sector was able to expand its use of credit uninterruptedly since the early 1990s. Also, in contrast with the Uruguayan case, mortgaging of properties was relatively straightforward and inexpensive, and long term lending could be approved for terms of generally up to 20 years. These factors contributed to the expansion of rural credit in New Zealand. However, New Zealand’s agricultural debt was found to be greatly exposed to one subsector (the dairy farming sector). Moreover, the level of debt of New Zealand’s agricultural sector surpassed its contribution to GDP many times over, which raised doubts concerning the long-term sustainability of that level of debt.

This study seeks to determine the spatial extent and characteristics of riparian forest on the South Island's West Coast, and to examine the ecological status and condition of riparian forest patches within the West Coast's agricultural landscape. The majority of West Coast riparian forest occurs on south Westland floodplains. Further north these forests were found to comprise <20% of the vegetation cover in 16/27 of the region's Ecological Districts. Today >80 000 ha (53%) of the floodplains are in pasture, and <1% of the farmed areas are in indigenous forest. Remaining forests on the farmed floodplains are comprised of many small patches (mean size 3.7 ± 0.3 ha), with only 13 patches  9 ha.

Maud Island (Te Hoiere - "a long paddle or mighty pull") is a moderately sized island of 309 hectares, located in the Pelorus Sound (41°, 02 'S, 173° 54 'E) Marlborough, at the north-east end of the South Island of New Zealand. It has a long history of human modification and impacts since its colonisation by Maori and early Europeans. The vegetation of Maud Island has been studied in the 1980's and again in the early 1990's. The objectives of this study were to (1) describe how the vascular plant communities vary in species composition across Maud Island, (2) determine which environmental factors are important predictors of the variation in species composition of Maud Island plant communities, and (3) describe the pattern of succession of the plant communities on Maud Island over the last twenty years. In this 2001 study, I comprehensively sampled the vegetation on Maud Island using a Reconnaissance Description Procedure in a total of 158 plots across the island and compared these results to previous descriptions. I also retook photos at permanent photo points to provide a visual comparison of vegetation change. In total, 219 plant species were identified; 177 species occurred within the plots and 42 additional species were observed while walking around the coastline and walking tracks. Six dominant plant species occurred in over 70% of the plots. They were Pteridium esculentum, Pseudopanax arboreus, Hebe stricta var. stricta, Melicytus ramiflorus, Ozothamnus leptophylla and Coprosma robusta. Two-Way Indicator Species Analysis resulted in the description of eight different plant communities on the island. Detrended correspondence analysis showed a high degree of turnover in species composition among these communities. Canonical correspondence analysis showed that slope and moisture were particularly important predictors of variation in plant species composition. The environmental factors that best predicted to variation communities were slope, moisture, and a gradient in historical disturbance. Comparisons of present and past vegetation maps and photos (ground and aerial) showed, in terms of the successional pathways of the vegetation on Maud Island, that over time, the vegetation is reverting from short stature grassland and scrub to predominantly forest scrub and young secondary forest.

The New Basel Capital Accord (Basel II) provides added emphasis to the development of portfolio credit risk models. An important regulatory change in Basel II is the differentiated treatment in measuring capital requirements for the corporate exposures and retail exposures. Basel II allows agricultural loans to be categorized and treated as the retail exposures. However, portfolio credit risk model for agricultural loans is still in their infancy. Most portfolio credit risk models being used have been developed for corporate exposures, and are not generally applicable to agricultural loan portfolio. The objective of this study is to develop a credit risk model for agricultural loan portfolios. The model developed in this study reflects characteristics of the agricultural sector, loans and borrowers and designed to be consistent with Basel II, including consideration given to forecasting accuracy and model applicability. This study conceptualizes a theory of loan default for farm borrowers. A theoretical model is developed based on the default theory with several assumptions to simplify the model. An annual default model is specified using FDIC state level data over the 1985 to 2003. Five state models covering Iowa, Illinois, Indiana, Kansas, and Nebraska areestimated as a logistic function. Explanatory variables for the model are a three-year moving average of net cash income per acre from crops, net cash income per cwt from livestock, government payments per acre, the unemployment rate, and a trend. Net cash income generated by state reflects the five major commodities: corn, soybeans, wheat, fed cattle, and hogs. A simulation model is developed to generate the stochastic default rates by state over the 2004 to 2007 period, providing the probability of default and the loan loss distribution in a pro forma context that facilitates proactive decision making. The model also generates expected loan loss, VaR, and capital requirements. This study suggests two key conclusions helpful to future credit risk modeling efforts for agricultural loan portfolios: (1) net cash income is a significant leading indicator to default, and (2) the credit risk model should be segmented by commodity and geographical location.

Thesis (Ph. D.)--Public Policy, Georgia Institute of Technology, 2008.
Herrera, Hector, Committee Member ; Cozzens, Susan, Committee Chair ; Rogers, Juan, Committee Member ; Shapira, Philip, Committee Member ; Bowman, Kirk, Committee Member.

The purpose of this thesis is to analyze the drivers and dynamics of credit losses in Australasian banking over an extended period of time in order to improve the means by which financial institutions manage their credit risks and regulatory bodies safeguard the stability and integrity of the financial system. The analysis is based on a specially constructed data base of credit loss and provisioning data retrieved from original financial reports published by Australian and New Zealand banks. The observation period covers 1980 to 2005, starting at the time when such information was published for the first time in bank financial statements. It moreover covers the time of major crises which occurred in both Australia and New Zealand in the late 1980s and early 1990s. The heterogeneity of reporting the data both amongst banks and through time requires the development of a reporting typology which allows data extraction with equivalent informational content. As a thorough study of credit risks requires long data series often not available from third party data providers, the method developed here will provide value to a range of researchers. Based on an evaluation of many alternative proxies which track a bank's credit loss experience (CLE), the thesis proposes a preferred model for impaired assets expense (as % of loans) as dependent variable, mainly because of its timely nature and good data availability. Explanatory variables include aggregate macro variables of which changes in unemployment and the return in the share markets are found to have the most significant influence on a bank's credit losses. Bank-specific control variables include a pre-provision earnings proxy whose significance points to the use of provisions for the purpose of income smoothing by Australasian banks. The model also controls for size and nature of lending as smaller, retail-oriented housing lenders, on average, exhibit lower loan losses. Clear results are found with regard to the effect of rapid expansion which appears to be followed by a surge of bad debt provisions 2 to 3 years later. Moreover, inefficient banks tend to suffer greater credit losses. An important part of the thesis looks at the characteristics of alternative CLE proxies such as stock of provisions, impaired assets and write-offs which have been used by earlier literature. Estimating the preferred model with such alternative CLE parameters confirms their peculiarities such as the memory character of stock of provisions and the delayed nature of write-offs. These measures correlate rather poorly amongst themselves which calls for caution in the comparative interpretation of earlier studies that use differing CLE proxies.

Energy use associated with tourism has rarely been studied, despite a potentially considerable contribution to global or national energy demand and concomitant greenhouse gas emissions. In New Zealand, tourism constitutes an increasingly important economic sector that is supported by the Government to induce further economic growth. At the same time New Zealand is facing the challenge of reducing currently increasing fossil fuel combustion and carbon dioxide emissions. As a response, this study investigated the contribution tourism makes to energy use in New Zealand. In particular it has examined the role of the three main tourism subsectors (transport, accommodation, and attractions/activities), and different domestic and international 'tourist types'. Seven separate data analyses provided inputs for building a model based on 'tourist types' from which energy use in the New Zealand tourism sector could be estimated. Tourism was found to contribute at least 5.6% to national energy demand, which is larger than its 4.9% contribution to GDP in 2000. Transport, in particular domestic air and car travel, was identified as the dominant energy consumer. Within the accommodation sub-sector, hotels are the largest energy consumers, both in total and on a per visitor-night basis. Of the three sub-sectors, attractions and activities contribute least to energy use, however, activities such as scenic flights or boat cruises were recognised as being energy intensive. As a result of larger visitor volumes, domestic tourists contribute more to energy consumption than international tourists. Domestic and international tourists types differ in their energy consumption patterns, for example measured as energy use per travel day. Tourist types that rely on air travel are the most energy intensive ones, for example the domestic 'long air business' travellers or the international 'coach tourists'. The importance of international tourists' energy use will increase, given current growth rates. There are many options to decrease energy use of the tourism sector, with the most effective ones being within the energy intensive transport sub-sector. Increasing vehicle efficiencies and decreasing travel distances appear to be the most promising measures. This study argues that energy use depends largely on tourists' travel behaviour. Changing behaviour is possible but is postulated to be very difficult, and further research is needed to better understand tourists' motivations, expectations and decision-making. Only then, can strategies be developed and implemented to alter travel behaviours to better balance energy use, other environmental impacts and economic yield. Such a balance is a crucial consideration in the search for more sustainable forms of tourism.

Skiing and snowboarding are popular recreation activities in New Zealand, as well as constituting important components of the winter tourism product. The 2001 snow season witnessed record visitor numbers. Skier days have increased by more than 10% compared with the previous year to 1.254 million. The traditionally “nature related” activity of skiing, however has increasingly often been discussed in the light of excessive resource consumption and pollution of alpine environments. Since no research on resource efficient management of ski fields has been undertaken in New Zealand, this study examined environmental awareness and actions of ski field managers, resource consumption benchmarks (water and energy use, solid waste production), along with resource use related visitor behaviour. Two separate surveys were undertaken to collect relevant information from ski field managers and ski field visitors. While a census of managers across New Zealand was conducted with a mail-back questionnaire (all 27 ski fields were contacted, response rate 44%), the visitor survey was undertaken on-site at six selected ski fields in Canterbury, South Island (total responses: N=259). Analysis of the survey results showed that managers generally acted to protect the environment and resources, however, at different levels for the various indicators measured. Energy use and air pollution were rarely perceived to be environmentally important. Accordingly, only few actions were undertaken to reduce energy use. This is surprising, since energy consumption proved to be a major feature of ski field management. Given the additionally large amounts of water consumed (mainly for snowmaking) and solid waste produced on the mountain, skiing has to be classified as a resource intensive activity. Resource consumption is intensified further, when the impacts associated with tourists being transported to, and from, the mountain are considered. Energy use for “ski trip transport” within New Zealand is two times larger (180 MJ) than energy use associated with ski field infrastructure use (90 MJ) on a per skier day basis. There are several options to improve the environmental performance of ski fields, ranging from modernising equipment, optimising snowmaking and providing efficient transport alternatives. Additionally, increased cooperation between ski field managers, local governments and research institutes could potentially result in environmentally smarter operational practices. Internationally, New Zealand’s ski areas compare relatively well, mainly because of limited on-mountain entertainment and accommodation development, which keeps resource consumption and pollution low compared with European and North American ski fields. However, this research also indicated that New Zealand’s ski field visitors increasingly demand facilities and services similar to those overseas, which in turn may result in larger environmental impacts. New Zealand is generally believed to be a green and nature-related destination and its ski areas still blend well into the natural environment. Hence, there is some potential for the New Zealand ski industry to develop a unique product in such a way that it is both, sustainable and distinguishable from other international markets.

Biodiversity loss is an important issue for New Zealand: for the domestic environment, economy and society, but also for New Zealand as a member of the international community. Biodiversity offset banking is making an important contribution to addressing such issues in a number of countries around the world. Developing the ability to participate and take advantage of possible benefits requires comprehensively understanding both the fundamental principles and varying concepts, and supports the analysis necessary for New Zealand to progress towards offset banking. New Zealand can learn much from observing and investigating overseas models and use them as valuable templates. California and New South Wales provide examples of potential policies and frameworks (both economic and social) to establish and operate successful offset banking systems. Discussions of offset banking, both in theory and practice, frequently concern the potential failings of the system. These issues can be conceptualised as various forms of risk. Considering offset banking as sustainable development, this thesis addresses such risks to reflect the tripartite biological, financial and social framework of sustainable development. Biologically, risk is in the potential biodiversity outcomes are inadequate, unexpected or undesirable. Scientific uncertainty underlies this, both inherently and from the limits of current scientific disciplines. Through expanding scientific knowledge and experience, measures for reducing or accommodating the risk of uncertainty are emerging. Financial risk represents concerns that individual banks may lack the monetary support to achieve the specific biodiversity conservation required for the site. Also the system of interacting banks, bankers and traders may fail to produce financial outcomes that support effective and efficient biodiversity conservation over the breath of the scheme. Social risk lies in the potential that societies’ individuals conduct themselves in ways that conflict with achieving biodiversity conservation through malfeasance or negligence. Additionally, there is social risk that an offset banking system fails to respond appropriately to broader society and human, such as equity and intergenerational justice. Here, deliberating these risks is primary to appreciating how design elements and emergent properties minimize risks. Given comprehensive understanding, components of a system can be designed and allow informed policy, regulations and rules to offer successful risk mitigation. For this reason policy, rules and regulations observed within California and New South Wales helps to discuss this and establish guidance for New Zealand offset banking design to draw upon. Californian systems are achieving promising conservation and continued growth; New South Wales’ Biobanking scheme is robustly designed and in its early stages. Each contrasts in design and carries varying criticisms. California has been observed as potentially shortcoming biologically, whereas New South Wales Biobanking has been questioned based on the strength and character of its economic underpinnings. In addition to these considerations, New Zealand has significant societal perspectives to incorporate given current popular, socio-democratic conservation modus operandi. Identifying the three forms of risk present highlights the importance of allocating appropriate consideration and expertise to the biological, economic and social components of offset banking. Successful sustainable development, biodiversity conservation and risk mitigation may be achieved through designing mechanisms, regulations and governing policy for offset banking. New Zealand may therefore expand the success and application of current offsetting by taking guidance from examples and analysis presented here.

Recent e-commerce failures caused by poor e-customer service have motivated many researchers to explore the factors that influence e-customer service quality, which leads to business-to-consumer (B2C) e-commerce success. The research reported in this paper explored the perceptions of a group of New Zealand e-customers and e-users about e-customer service and the influence of their perceptions on their attitudes towards Internet shopping. The study findings strongly indicate e-customers are only moderately satisfied with current e-customer service. Conversely, New Zealand e-users (i.e.: not yet “customers”) are discouraged from using the Internet for shopping due to issues such as credit card security, resistance to change, lack of physicality, hard-to-trust online vendors, and the perceived insecurity of payment systems. The study found that the motivators to Internet shopping are: goods returns and refunds policy, privacy protection, timely online service, ease of use, help and support facilities. Based on these findings, some recommendations on e-customer service for Internet shopping are presented.

Agricultural production depends on natural conditions. All the countries try to stabilize and increase the food supply for communities. For this reason, the agriculture sector, support policies analyzed and conducted well. In agricultural support policies, there are different objectives like raising farm incomes, production and productivity. In Turkey, agricultural is very important. Because certain part of the population of Turkey live in rural areas. There are agricultural activities. They support those living in urban areas, especially in times of crisis. People living in rural areas, as well as food and labor force ready for those living in urban areas. In 2001 is an important milestone in Turkish agricultural policies. Before 2001, agricultural support policies consisted of mainly market price support, credit support and input subsidies. New policies started to be implemented after 2001. The purpose of this study was to determine the level of success in the new agricultural support policies in the context of the agreement with the European Union. We tried to find the best way to deal with the current main problems of Turkish Agricultural Sector in last year's.

Tottori University and the Japan Atomic Energy Agency carried out jointly the feasibility study on phytoremediation techniques, which apply to soil contaminated by the TEPCO’s Fukushima Dai-ichi NPP accident. This paper illustrates the results from experimental investigations. Experimental investigations include both water-culture tests and field tests. Several plants, mainly halophytes that can specifically absorb more Na than K, and others like sunflower demonstrated for other domestic large-scale tests, were water-cultured and examined for screening. Easily cultivated and harvested plants without harmful effects on subsequent cultivation were also considered. New Zealand spinach was selected as a candidate for demonstrations in fields. The field tests were carried out at two sites of different agricultural types in Minami-soma, Fukushima prefecture. Concentration of 137Cs in soil is about 4.5 Bq/g-dry as the average of 10 cm depth. The aims of the field tests are to confirm absorption ability and environmental adaptation of the test plants and to document the cost and performance of projects. In conclusion, the absorption of 137Cs activity per unit area (Bq/m2) by New Zealand spinach could be approximately 0.5%. To achieve an effective result in removal of 137Cs from soil in around a decade, it is required to find the plant which has ten or more times higher absorption capacity than New Zealand spinach. From the consistency of both results in water-culture and field tests, the water-culture test can be valid for screening. In addition, applicable sites will be limited to fields which are too steep or too narrow to use mechanical diggers, and which are free from any restrictions to enter.

Emissions trading systems (ETS) and markets usually do not allow for the inclusion of carbon dioxide removal (CDR) activities and if they do, removal activities are primarily restricted to afforestation. The New Zealand emission trading system (NZ ETS), for examples, integrates afforestation, and the California Low-Fuel Standard, the Quebec ETS and the Chinese ETS permit the restricted inclusion of afforestation offsets. Furthermore, the California Low-Carbon Fuel Standard System allows for the inclusion of removal via Direct Air Capture. In combination with the 45Q tax credit program, the largest incentives for CDR via Negative Emissions Technologies (NETs) are currently provided in the US. However, both do not yet allow for the inclusion of ocean-based carbon removal. Hence, we provide first a brief overview about the NZ ETS and its inclusion of afforestation, pointing out that the concept will likely not be applicable to ocean-based CDR with the potential exemption of blue carbon projects. Second, we discuss the 45Q tax credit program, the California Low-Fuel Standard System, and the California Compliance Offset Scheme. Third, we provide an overview about the company database related to ocean-based carbon removal. Fourth, we briefly look at the voluntary carbon market, providing some insights for carbon removal accounting.

1.1 Macroeconomic summary Economic recovery has consistently outperformed the technical staff’s expectations following a steep decline in activity in the second quarter of 2020. At the same time, total and core inflation rates have fallen and remain at low levels, suggesting that a significant element of the reactivation of Colombia’s economy has been related to recovery in potential GDP. This would support the technical staff’s diagnosis of weak aggregate demand and ample excess capacity. The most recently available data on 2020 growth suggests a contraction in economic activity of 6.8%, lower than estimates from January’s Monetary Policy Report (-7.2%). High-frequency indicators suggest that economic performance was significantly more dynamic than expected in January, despite mobility restrictions and quarantine measures. This has also come amid declines in total and core inflation, the latter of which was below January projections if controlling for certain relative price changes. This suggests that the unexpected strength of recent growth contains elements of demand, and that excess capacity, while significant, could be lower than previously estimated. Nevertheless, uncertainty over the measurement of excess capacity continues to be unusually high and marked both by variations in the way different economic sectors and spending components have been affected by the pandemic, and by uneven price behavior. The size of excess capacity, and in particular the evolution of the pandemic in forthcoming quarters, constitute substantial risks to the macroeconomic forecast presented in this report. Despite the unexpected strength of the recovery, the technical staff continues to project ample excess capacity that is expected to remain on the forecast horizon, alongside core inflation that will likely remain below the target. Domestic demand remains below 2019 levels amid unusually significant uncertainty over the size of excess capacity in the economy. High national unemployment (14.6% for February 2021) reflects a loose labor market, while observed total and core inflation continue to be below 2%. Inflationary pressures from the exchange rate are expected to continue to be low, with relatively little pass-through on inflation. This would be compatible with a negative output gap. Excess productive capacity and the expectation of core inflation below the 3% target on the forecast horizon provide a basis for an expansive monetary policy posture. The technical staff’s assessment of certain shocks and their expected effects on the economy, as well as the presence of several sources of uncertainty and related assumptions about their potential macroeconomic impacts, remain a feature of this report. The coronavirus pandemic, in particular, continues to affect the public health environment, and the reopening of Colombia’s economy remains incomplete. The technical staff’s assessment is that the COVID-19 shock has affected both aggregate demand and supply, but that the impact on demand has been deeper and more persistent. Given this persistence, the central forecast accounts for a gradual tightening of the output gap in the absence of new waves of contagion, and as vaccination campaigns progress. The central forecast continues to include an expected increase of total and core inflation rates in the second quarter of 2021, alongside the lapse of the temporary price relief measures put in place in 2020. Additional COVID-19 outbreaks (of uncertain duration and intensity) represent a significant risk factor that could affect these projections. Additionally, the forecast continues to include an upward trend in sovereign risk premiums, reflected by higher levels of public debt that in the wake of the pandemic are likely to persist on the forecast horizon, even in the context of a fiscal adjustment. At the same time, the projection accounts for the shortterm effects on private domestic demand from a fiscal adjustment along the lines of the one currently being proposed by the national government. This would be compatible with a gradual recovery of private domestic demand in 2022. The size and characteristics of the fiscal adjustment that is ultimately implemented, as well as the corresponding market response, represent another source of forecast uncertainty. Newly available information offers evidence of the potential for significant changes to the macroeconomic scenario, though without altering the general diagnosis described above. The most recent data on inflation, growth, fiscal policy, and international financial conditions suggests a more dynamic economy than previously expected. However, a third wave of the pandemic has delayed the re-opening of Colombia’s economy and brought with it a deceleration in economic activity. Detailed descriptions of these considerations and subsequent changes to the macroeconomic forecast are presented below. The expected annual decline in GDP (-0.3%) in the first quarter of 2021 appears to have been less pronounced than projected in January (-4.8%). Partial closures in January to address a second wave of COVID-19 appear to have had a less significant negative impact on the economy than previously estimated. This is reflected in figures related to mobility, energy demand, industry and retail sales, foreign trade, commercial transactions from selected banks, and the national statistics agency’s (DANE) economic tracking indicator (ISE). Output is now expected to have declined annually in the first quarter by 0.3%. Private consumption likely continued to recover, registering levels somewhat above those from the previous year, while public consumption likely increased significantly. While a recovery in investment in both housing and in other buildings and structures is expected, overall investment levels in this case likely continued to be low, and gross fixed capital formation is expected to continue to show significant annual declines. Imports likely recovered to again outpace exports, though both are expected to register significant annual declines. Economic activity that outpaced projections, an increase in oil prices and other export products, and an expected increase in public spending this year account for the upward revision to the 2021 growth forecast (from 4.6% with a range between 2% and 6% in January, to 6.0% with a range between 3% and 7% in April). As a result, the output gap is expected to be smaller and to tighten more rapidly than projected in the previous report, though it is still expected to remain in negative territory on the forecast horizon. Wide forecast intervals reflect the fact that the future evolution of the COVID-19 pandemic remains a significant source of uncertainty on these projections. The delay in the recovery of economic activity as a result of the resurgence of COVID-19 in the first quarter appears to have been less significant than projected in the January report. The central forecast scenario expects this improved performance to continue in 2021 alongside increased consumer and business confidence. Low real interest rates and an active credit supply would also support this dynamic, and the overall conditions would be expected to spur a recovery in consumption and investment. Increased growth in public spending and public works based on the national government’s spending plan (Plan Financiero del Gobierno) are other factors to consider. Additionally, an expected recovery in global demand and higher projected prices for oil and coffee would further contribute to improved external revenues and would favor investment, in particular in the oil sector. Given the above, the technical staff’s 2021 growth forecast has been revised upward from 4.6% in January (range from 2% to 6%) to 6.0% in April (range from 3% to 7%). These projections account for the potential for the third wave of COVID-19 to have a larger and more persistent effect on the economy than the previous wave, while also supposing that there will not be any additional significant waves of the pandemic and that mobility restrictions will be relaxed as a result. Economic growth in 2022 is expected to be 3%, with a range between 1% and 5%. This figure would be lower than projected in the January report (3.6% with a range between 2% and 6%), due to a higher base of comparison given the upward revision to expected GDP in 2021. This forecast also takes into account the likely effects on private demand of a fiscal adjustment of the size currently being proposed by the national government, and which would come into effect in 2022. Excess in productive capacity is now expected to be lower than estimated in January but continues to be significant and affected by high levels of uncertainty, as reflected in the wide forecast intervals. The possibility of new waves of the virus (of uncertain intensity and duration) represents a significant downward risk to projected GDP growth, and is signaled by the lower limits of the ranges provided in this report. Inflation (1.51%) and inflation excluding food and regulated items (0.94%) declined in March compared to December, continuing below the 3% target. The decline in inflation in this period was below projections, explained in large part by unanticipated increases in the costs of certain foods (3.92%) and regulated items (1.52%). An increase in international food and shipping prices, increased foreign demand for beef, and specific upward pressures on perishable food supplies appear to explain a lower-than-expected deceleration in the consumer price index (CPI) for foods. An unexpected increase in regulated items prices came amid unanticipated increases in international fuel prices, on some utilities rates, and for regulated education prices. The decline in annual inflation excluding food and regulated items between December and March was in line with projections from January, though this included downward pressure from a significant reduction in telecommunications rates due to the imminent entry of a new operator. When controlling for the effects of this relative price change, inflation excluding food and regulated items exceeds levels forecast in the previous report. Within this indicator of core inflation, the CPI for goods (1.05%) accelerated due to a reversion of the effects of the VAT-free day in November, which was largely accounted for in February, and possibly by the transmission of a recent depreciation of the peso on domestic prices for certain items (electric and household appliances). For their part, services prices decelerated and showed the lowest rate of annual growth (0.89%) among the large consumer baskets in the CPI. Within the services basket, the annual change in rental prices continued to decline, while those services that continue to experience the most significant restrictions on returning to normal operations (tourism, cinemas, nightlife, etc.) continued to register significant price declines. As previously mentioned, telephone rates also fell significantly due to increased competition in the market. Total inflation is expected to continue to be affected by ample excesses in productive capacity for the remainder of 2021 and 2022, though less so than projected in January. As a result, convergence to the inflation target is now expected to be somewhat faster than estimated in the previous report, assuming the absence of significant additional outbreaks of COVID-19. The technical staff’s year-end inflation projections for 2021 and 2022 have increased, suggesting figures around 3% due largely to variation in food and regulated items prices. The projection for inflation excluding food and regulated items also increased, but remains below 3%. Price relief measures on indirect taxes implemented in 2020 are expected to lapse in the second quarter of 2021, generating a one-off effect on prices and temporarily affecting inflation excluding food and regulated items. However, indexation to low levels of past inflation, weak demand, and ample excess productive capacity are expected to keep core inflation below the target, near 2.3% at the end of 2021 (previously 2.1%). The reversion in 2021 of the effects of some price relief measures on utility rates from 2020 should lead to an increase in the CPI for regulated items in the second half of this year. Annual price changes are now expected to be higher than estimated in the January report due to an increased expected path for fuel prices and unanticipated increases in regulated education prices. The projection for the CPI for foods has increased compared to the previous report, taking into account certain factors that were not anticipated in January (a less favorable agricultural cycle, increased pressure from international prices, and transport costs). Given the above, year-end annual inflation for 2021 and 2022 is now expected to be 3% and 2.8%, respectively, which would be above projections from January (2.3% and 2,7%). For its part, expected inflation based on analyst surveys suggests year-end inflation in 2021 and 2022 of 2.8% and 3.1%, respectively. There remains significant uncertainty surrounding the inflation forecasts included in this report due to several factors: 1) the evolution of the pandemic; 2) the difficulty in evaluating the size and persistence of excess productive capacity; 3) the timing and manner in which price relief measures will lapse; and 4) the future behavior of food prices. Projected 2021 growth in foreign demand (4.4% to 5.2%) and the supposed average oil price (USD 53 to USD 61 per Brent benchmark barrel) were both revised upward. An increase in long-term international interest rates has been reflected in a depreciation of the peso and could result in relatively tighter external financial conditions for emerging market economies, including Colombia. Average growth among Colombia’s trade partners was greater than expected in the fourth quarter of 2020. This, together with a sizable fiscal stimulus approved in the United States and the onset of a massive global vaccination campaign, largely explains the projected increase in foreign demand growth in 2021. The resilience of the goods market in the face of global crisis and an expected normalization in international trade are additional factors. These considerations and the expected continuation of a gradual reduction of mobility restrictions abroad suggest that Colombia’s trade partners could grow on average by 5.2% in 2021 and around 3.4% in 2022. The improved prospects for global economic growth have led to an increase in current and expected oil prices. Production interruptions due to a heavy winter, reduced inventories, and increased supply restrictions instituted by producing countries have also contributed to the increase. Meanwhile, market forecasts and recent Federal Reserve pronouncements suggest that the benchmark interest rate in the U.S. will remain stable for the next two years. Nevertheless, a significant increase in public spending in the country has fostered expectations for greater growth and inflation, as well as increased uncertainty over the moment in which a normalization of monetary policy might begin. This has been reflected in an increase in long-term interest rates. In this context, emerging market economies in the region, including Colombia, have registered increases in sovereign risk premiums and long-term domestic interest rates, and a depreciation of local currencies against the dollar. Recent outbreaks of COVID-19 in several of these economies; limits on vaccine supply and the slow pace of immunization campaigns in some countries; a significant increase in public debt; and tensions between the United States and China, among other factors, all add to a high level of uncertainty surrounding interest rate spreads, external financing conditions, and the future performance of risk premiums. The impact that this environment could have on the exchange rate and on domestic financing conditions represent risks to the macroeconomic and monetary policy forecasts. Domestic financial conditions continue to favor recovery in economic activity. The transmission of reductions to the policy interest rate on credit rates has been significant. The banking portfolio continues to recover amid circumstances that have affected both the supply and demand for loans, and in which some credit risks have materialized. Preferential and ordinary commercial interest rates have fallen to a similar degree as the benchmark interest rate. As is generally the case, this transmission has come at a slower pace for consumer credit rates, and has been further delayed in the case of mortgage rates. Commercial credit levels stabilized above pre-pandemic levels in March, following an increase resulting from significant liquidity requirements for businesses in the second quarter of 2020. The consumer credit portfolio continued to recover and has now surpassed February 2020 levels, though overall growth in the portfolio remains low. At the same time, portfolio projections and default indicators have increased, and credit establishment earnings have come down. Despite this, credit disbursements continue to recover and solvency indicators remain well above regulatory minimums. 1.2 Monetary policy decision In its meetings in March and April the BDBR left the benchmark interest rate unchanged at 1.75%.