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Colombia Business Forecast Report Q1 2015

  • October 2014
  • -
  • Business Monitor International
  • -
  • 53 pages

Core Views
We believe that Colombia’s economy will expand at robust growth rates in the coming years, benefiting from strong private consumption and rising gross fixed capital formation (GFCF). That said, with the oil sector set for slower growth, this will prompt larger net exports deficits, such that we expect slightly slower growth over the next
decade than in the last.

T he infrastructure, telecommunications and power sectors are particularly well positioned for growth. A fter President Juan Manuel Santos won re-election in May, we expect broad policy continuity throughout the next administration.

Major Forecast Changes
We have tempered our optimism on Colombia’s long-term growth outlook. While the country remains one of our favourites in the region, our increasingly cautious view toward the country’s oil sector will feed through to the economy in a number of ways:

Table Of Contents

Colombia Business Forecast Report Q1 2015
Executive Summary 5
Core Views..5
Major Forecast Changes.5
Key Risks To Outlook..5
Chapter 1: Political Outlook 7
SWOT Analysis. 7
BMI Political Risk Index.. 7
Domestic Politics .. 8
More Challenging Policymaking Environment Ahead..8
More fractious relations within Colombia's ruling Unidad Nacional coalition suggest a rougher road for President Juan Manuel Santos
during his second term.
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 Index 13
Economic Activity .. 14
Slower Growth In 2015, But Still A Regional Favourite.14
Strong private consumption and investment will act as tailwinds for the Colombian economy. However, following the 5.4% year-on-year
expansion in H114, Colombia's real GDP growth will slow slightly through H214 and 2015 on the back of unfavourable base effects and
sluggish exports.
Table: GDP By Expenditure14
Monetary Policy. 16
Accelerating Growth To Prompt Final Rate Hike In 2015 16
Colombia's Banco de la Republica will keep its policy rate at 4.50% through end-2014, with both growth and long-term inflation
expectations set to remain contained in the coming months. Thereafter, we forecast 25 basis points worth of hikes in 2015, as growth
begins to accelerate more substantially.
Table: Monetary Policy..17
Fiscal Policy. 18
Government Facing Harder Choices Ahead 18
With oil revenues set to head lower in the coming years, the Colombian government is facing hard choices ahead between cutting
spending or relaxing its fiscal consolidation targets. While we expect the government will press ahead with efforts to reduce its
budgetary shortfalls in the coming years, toward the latter part of our forecast period we are now factoring in moderate fiscal slippage.
Table: Fiscal Policy.18
Balance Of Payments 20
Slowing Oil Production To Weigh On External Account Position..20
Slowing oil production growth in Colombia will weigh on exports, widening the country's current account shortfalls over the coming
decade. That said, a strong business environment and sizeable number of sector-specific opportunities will ensure that the country is
able to comfortably fund its external account deficits.
Table: Current Account.21
Exchange Rate Policy 23
COP: Weaker Outlook For The Peso23
US dollar strength will continue to weigh on the Colombian peso, keeping the currency on a broadly depreciatory trajectory through end-
2015. While the currency will rebound modestly thereafter, appreciation will be tempered by weak oil sector exports and investment.
Table: Exchange Rate23
Chapter 3: 10-Year Forecast. 25
The Colombian Economy To 2023.. 25
Slowing Oil Production To Dim Bright Macroeconomic Outlook25
Colombia's business-friendly policies, improving security environment and strengthening labour market dynamics will act as tailwinds
to the economy over the next decade. However, with the country's oil production slowing, this will not only temper real GDP growth, but
also feed through to wider fiscal and external account deficits.
Table: Long-Term Macroeconomic Forecasts25
Chapter 4: Operational Risk. 29
Operational Risk Index. 29
Operational Risk 30
Table: Operational Risk..30
Transport Network .. 31
Table: Transport Network Risks..32
Economic Openness.. 35
Table: Economic Openness Risk..35
Table: Imports By Product..36
Chapter 5: Key Sectors.. 39
Oil and Gas 39
Table: Headline Forecasts .39
Table: Oil Production (2012-2017)40
Table: Oil Production (2018-2023)40
Table: Gas Production (2012-2017)..42
Table: Gas Production (2018-2023)..42
Infrastructure.. 43
Table: Construction And Infrastructure Industry Data (2012-2017) 45
Table: Construction And Infrastructure Industry Data (2018-2023) .. 46
Other Key Sectors 49
table: Pharma Sector Key Indicators.49
table: Telecoms Sector Key Indicators49
table: Defence and Security Sector Key Indicators..49
table: Food and Drink Sector Key Indicators.50
table: Autos Sector Key Indicators.50
table: Freight Key Indicators..50
Chapter 6: BMI Global Assumptions.. 51
Global Outlook 51
Big Emerging Market Revisions.51
Table: Global Assumptions.51
Table: Developed States, Real GDP GrowtH, %..52
Table: Emerging Markets, Real GDP Growth, %.53

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