BOGOTA, Nov 3 (Reuters)Colombia’s economy will contract between 6.5% and 9% this year, the central bank said in a report on Tuesday, a more optimistic projection than its previous estimate for a contraction of between 6% and 10%.

The bank expects inflation to end 2020 at 1.9%, it said in the report, in line with its previously predicted range of 1% to 2%. The forecast remains far from the long-term target rate of 3%.

Colombia’s economy was battered by a more than five-month-long quarantine meant to control the spread of coronavirus. Though the lockdown was gradually loosened before it ended at the close of August, it shuttered businesses and sent unemployment soaring.

The government expects 5.5% contraction this year, before recovery growth of 6.6% in 2021.

The central bank sees Colombia’s economic growth in 2021 at between 3% and 7%, it said in its report.

Urban unemployment, which shot up to nearly 25% amid quarantine, was down to 18.3% in September.

The central bank ended seven months of rate reductions last week, holding benchmark borrowing costs at a historic low of 1.75% ahead of possible inflationary pressures as the economy continues its reopening, including the end of public service subsidies for lower-income households.

Consumer price growth was 0.32% in September, taking 12-month price growth to 1.97%. Both figures were well above market expectations.

Analysts in a recent Reuters poll expect inflation to reach 1.84% at the close of this year, up from the 1.7% predicted the month before.

(Reporting by Julia Symmes Cobb and Nelson Bocanegra; Editing by Cynthia Osterman)

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