New Market Research Report: Colombia Business Forecast Report Q1 2011

Jan. 2, 2011 - PRLog -- Life In The Fast Lane

Colombia is fast becoming one of our favourite economies in Latin America, as its accommodative business environment and investorfriendly policy mix imply its growth is set to accelerate over the medium term, while other key economies in the region are slowing down. In the Colombia Business Forecast Report Q111 we take a look at how President Juan Manuel Santos's administration is encouraging this economic development, and identify several sectors within the economy that are prime targets for investment over the coming years. On the politics front, we assess Santos' social reform agenda and the scope for the realignment in diplomatic relations away from the US towards Latin America.

With regard to Colombia's economic expansion, we forecasted real GDP growth to come in at 3.9% in 2010, 4.7% in 2011, and 4.9% in 2012. While gross fixed capital formation will drive the majority of the economic expansion over the medium term, we expect private consumption to take the reins by 2013 as private credit growth surges. Although government consumption and net exports will exert only a mild upward influence on growth beyond 2010, headline growth will still be fairly substantial overall. Consequently, we will see Colombia's pace of expansion overtake that of Brazil, Chile and Argentina by 2011, as nominal GDP per capita rises from US $5,138 in 2009 to US $7,787 in 2013.

The first signs of surging investment, however, have placed the Colombian central bank (BanRep) in a difficult position owing to the impact of peso appreciation on export competitiveness. We believe BanRep's decision to continue with a schedule of currency intervention over the short term is likely to rule out a policy rate hike until mid-2011. As a result, we have revised our forecast for the policy rate from 4.50% to 4.75% in 2011, in order to offset the delay in necessary monetary policy tightening. We are forecasting inflation to come in at 3.6% y-o-y by end-2011 and end-2012, up from 2.8% in 2010, primarily owing to the moderate recovery in private credit growth.

Besides our optimistic outlook for the economy, we are also relatively constructive towards Colombian politics.W e believe the new government's social reform agenda augurs well for an improvement in the country's political risk profile over the medium term, and could also facilitate ratification of the free trade agreement with the US . That said, the more radical reforms, such as land redistribution, are likely to face some opposition in the centre-right dominated congress; and the presence of the Fuerzas Armadas Revolucionarias de Colombia will continue to weigh on our proprietary risk ratings. Moving to foreign policy, and we expect a realignment of focus from the US towards the Latin American region. In addition, strong economic interdependence with Venezuela will likely promote full restoration of trade ties by end-2011, and even the risk of renewed tensions is unlikely to tarnish Colombia's relations with regional neighbours.

For more information or to purchase this report, go to:
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Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.