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Colombia Business Forecast Report Q4 2014

  • September 2014
  • -
  • Business Monitor International
  • -
  • 50 pages

Core Views
We believe that Colombia’s economy will expand at robust growth
rates in the coming years, characterised by improved macroeconomic
conditions and an increasingly friendly business environment.
S tronger private consumption will drive the majority of growth, although
gross fixed capital formation (GFCF) will play an increasingly
important role over the coming quarters.
T he infrastructure and mining sectors are particularly well positioned
for growth.
A fter President Juan Manuel Santos won re-election in May, we
anticipate broad policy continuity throughout the next administration

Major Forecast Changes
We have revised up our 2014 real GDP growth forecast from 4.6%
to 5.1%, after robust private consumption boosted the Q114 GDP
reading to a robust 6.4% year-on-year (y-o-y). We believe that in
the coming quarters, domestic demand will remain a major driver
of growth.
We have revised down our forecast for Colombia’s goods trade surplus,
from USD4.6bn to USD3.0bn, resulting in a downward revision
to our current account deficit forecast, from 2.6% of GDP to 3.0%.
The country posted its largest goods trade deficit ever in the first
four months on the year on the back of booming domestic demand
and a sharp drop in crude exports. While the return to operations
of the country’s major Caño Limón Coveñas pipeline will aid crude
export growth, this will not be sufficient to offset earlier weakness,
especially given our view that private consumption will continue to
offer tailwinds to import growth.

Table Of Contents

Colombia Business Forecast Report Q4 2014
Executive Summary. 5
Core Views..5
Major Forecast Changes5
Key Risks To Outlook5
Chapter 1: Political Outlook. 7
SWOT Analysis.. 7
BMI Political Risk Ratings 7
Domestic Politics . 8
Risk Of Attacks To Remain Elevated During Peace Process..8
The risk of attacks on energy infrastructure in Colombia by left-wing insurgents will remain elevated in the coming months, as insurgents
seek to increase their leverage in the ongoing peace negotiations with the government.
TABLE: POLITICAL OVERVIEW..8
Long-Term Political Outlook 9
Many Structural Challenges Ahead..9
While Colombia's long-term political outlook is set to remain relatively stable compared with its neighbours, we identify several massive
political challenges for the government over the next decade and highlight three scenarios for change.
Chapter 2: Economic Outlook 13
SWOT Analysis 13
BMI Economic Risk Ratings... 13
Economic Activity... 14
Investment And Consumption To Drive Robust Growth...14
Colombia's economy will expand at a robust pace in the next couple of years, driven by an acceleration in private consumption growth
and strong fixed investment. Construction will remain among the fastest growing sectors due to strong investment in infrastructure,
especially in the transport segment.
Table: GDP By Expenditure...14
Fiscal Policy. 16
Moving Back Toward Fiscal Consolidation In 2015...16
After Colombia posted a larger than expected fiscal deficit in H114, our core view remains that the country's budgetary shortfall will
narrow in 2015.
Table: Fiscal Policy16
Balance Of Payments.. 17
Oil Pipeline Attacks Tempering Goods Trade Growth...17
Robust consumer demand and an increased threat of attacks on Colombia's oil pipeline infrastructure have encouraged us to temper
our goods trade forecast for 2014, resulting in a widening of our current account deficit forecast from 2.6% of GDP to 3.0%.
Table: Current Account...18
Monetary Policy... 20
Hiking Cycle Nearing The End20
We see the monetary tightening cycle in Colombia as nearing its end, highlighting Banco de la República (BanRep)'s recent less
hawkish rhetoric.
table: Monetary Policy ...20
Table: BMI Currency Forecast...21
Exchange Rate Policy. 22
COP: Depreciatory Trajectory To Continue...22
We expect the Colombian peso to continue its depreciatory trajectory through the end of 2014, as the tailwinds from JP Morgan's
reweighting of Colombian debt fade, allowing the central bank's ongoing FX purchasing programme to have a more substantial impact.
Table: Excha nge Rat e22
Banking Sector 24
Strong Growth Potential For Consumer Loans And Electronic Deposits...24
Colombia's commercial banking sector will continue to expand rapidly over the next couple of years as the otherwise unbanked
population gains access to financial services. We see commercial loans and electronic deposits as two key segments posed for strong
growth in the coming years.
Table: Number of Users By Type Of Account...24
Chapter 3: 10-Year Forecast... 27
The Colombian Economy To 2023.. 27
Sustainable And Sturdy Growth.27
Business-friendly policies and an improving security situation will help Colombia achieve sustainable levels of strong real GDP growth,
which we forecast will average 4.6% in 2014-23. A surge in fixed investment will catalyse such growth over the coming years and we
expect consumption to follow suit and remain the main driver of the Colombian growth story.
table: Long-Term Macroeconomic Forecasts27
Chapter 4: Business Environment. 29
SWOT Analysis 29
BMI Business Environment Risk Ratings.. 29
Business Environment Outlook. 30
Table: BMI Business And Operation Risk Ratings30
Institutions... 31
Table: BMI Legal Framework Rating.31
Table: Labour Force Quality..32
Infrastructure... 33
TABLE: LATIN AMERICA - ANUAL FDI INFLOWS.33
Market Orientation... 34
Table: Trade And Investment Ratings.34
Operational Risk.. 35
Chapter 5: Key Sectors.. 37
Pharmaceuticals and Healthcare... 37
ta ble: Phar mac eutica l Sales - Hist orica l Data And Forecasts .. 38
ta ble: Healthcar e Expenditure Trends - Hist orica l Data And Forecasts .. 39
ta ble: Government Healthcar e Expenditure Trends - Hist orica l Data And Forecasts ... 39
ta ble: Privat e Healthcar e Expenditure Trends - Hist orica l Data And Forecasts . 39
Telecommunications... 40
ta ble: Telecoms Sect or - Mobile - Hist orica l Data and Forecasts 41
Table: Telecoms Sect or - Wireline - Hist orica l Data and Forecasts 42
Other Key Sectors... 45
table: Oil and Gas Sector Key Indicators.45
table: Defence and Security Sector Key Indicators...45
table: Infrastructure Sector Key Indicators...45
table: Food and Drink Sector Key Indicators.46
table: Autos Sector Key Indicators...46
ta ble: Freight Key Indicat ors 46
Chapter 6: BMI Global Assumptions. 47
Global Outlook. 47
Eurozone Downgrade On Poor Q214..47
Table: Global Assumptions.47
Table: Developed Stat es, Real GDP Growt H, %...48
Table: BMI VE RSUS BLOMBE RG CON SEN SUS REAL GDP GROWTH FORECASTS, %. 48
Table: Emerg ing Mark ets , Real GDP Growth , %..49

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