BOGOTA Colombia's government and industry associations called on the central bank to lower interest rates on Monday and urged business leaders to resume investment decisions, in a bid to shore up the economy.

Latin America's fourth-largest economy expanded 0.3% in the second quarter, much less than expected. The central bank has forecast growth of 0.9% for 2023, well below the 7.3% growth last year.

"We need to recover the economy," Finance Minister Ricardo Bonilla said in a statement after meeting with Colombia's major business associations. "What are we missing? The creation of the financial conditions so that we all go in the same direction."

Between April and June private investment in Colombia plummeted 24% versus the year-earlier period.

Businesses should not postpone investment decisions, said Jonathan Malagon, president of Colombia's banking association, Asobancaria, adding that reduced borrowing costs amid lower interest rates are expected in the future.

"Let's not postpone, let's not give up, let's not surrender, liquidity conditions in the Colombian economy are trending upward," he said.

Colombia's interest rates are at their highest level in a quarter of a century, ratcheted upwards due to the global inflationary shock that followed the coronavirus pandemic.

The central bank has held its benchmark interest rate stable at 13.25% at its last two rate meetings, after increasing it by 1,150 basis points between September 2021 and April 2023 to deal with inflation.

Both business leaders and the finance minister called on the central bank to begin cutting the rate.

"We believe that there are several conditions that today allow us to think of a path to reduction - which hopefully will start relatively soon - for the interest rate," said Bruce Mac Master, president of the Colombian business association ANDI.

Most analysts expect the first cut to the benchmark rate to fall in September or October.

(Reporting Nelson Bocanegra and Carlos Vargas; Writing by Oliver Griffin; Editing by Rosalba O'Brien)