New Market Study Published: Colombia Business Forecast Report Q1 2013

New Country Reports market report from Business Monitor International: "Colombia Business Forecast Report Q1 2013"

by Bill Thompson

(WireNews+Co) - Boston, MA - 30 January 2013

Core Views:

We believe that Colombia's economy will expand by above 4.0% growth rates in the coming years, characterised by improved macroeconomic conditions and an increasingly friendly business environment.

Private consumption, while moderating, will drive the majority of growth, although gross fixed capital formation (GFCF) will play an increasingly important role over the coming quarters.

The infrastructure, mining and hydrocarbons sectors are particularly well positioned for growth.

Major Forecast Changes:

While we momentarily revised up our end-2013 central bank policy rate forecast from 4.25% to 4.50%, the central bank's decision to cut its rate by 25 basis points (bps) to 4.50% in November 2012 encouraged us to re-adopt our previously held forecast. Indeed, with strong indications that Colombia's central bank will remain dovish, we forecast a 25 bps cut to bring the rate down from 4.50% to 4.25% in 2013.

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Key Risks To Outlook:

Upside Risks: Elevated foreign investment inflows into the country following Colombia's upgrade to 'investment grade' by all three major ratings agencies could drive growth even faster than expected.

Downside Risks: A further deterioration in global growth could place downward pressure on energy prices, dampening demand for Colombian exports and reducing foreign direct investment (FDI).

Partial Table of Contents:

Executive Summary

Core Views:

Major Forecast Changes:

Key Risks To Outlook:

Chapter 1: Political Outlook

SWOT Analysis

BMI Political Risk Ratings

Domestic Politics

FARC Deal No Guarantee For Peace

- Ongoing signs of distrust between the Colombian government and the FARC confirm our view that the current peace negotiations between both sides are unlikely to result in a definitive end to violence. Even if a peace accord were to be reached, there is no guarantee that FARC members would unanimously halt their operations, many of which are likely to be viewed as too lucrative to be abandoned .

TABLE: POLITICAL OVERVIEW

Long-Term Political Outlook

Many Structural Challenges Ahead

- 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 our 10-year forecast period and highlight three scenarios for change.

Chapter 2: Economic Outlook

SWOT Analysis

BMI Economic Risk Ratings

Economic Activity

Robust Growth To Continue In 2013

- We believe that strong investment into Colombia's hydrocarbons and infrastructure sectors, combined with resilient private consumption, will drive robust economic expansion in 2013. We therefore forecast real GDP growth to come in at 4.3% in 2013, down slightly from an estimated 4.4% in 2012, due to a moderation in export growth.

TABLE: ECONOMIC ACTIVITY

Fiscal Policy

Tax Reform To Lead Towards Fiscal Consolidation

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