Country Report Bolivia

Outlook for 2008-09

• Political tensions will remain high ahead of a recall vote on the national executive and departmental governors on August 10th.
• Renewed dialogue between the opposition and government over the alignment of proposed constitutional reforms with regional autonomy is unlikely before national recall voting.
• The government is expected to continue to use methods that have been criticised in the past as undemocratic, in order to progress with its agenda.
• The fiscal accounts will slip into deficit in the outlook period. The government's weak implementation capacity will constrain the effectiveness of public investment, but spending will still outstrip revenue growth.
• Higher food prices, supply disruptions and strong government spending will drive year-end inflation to 14.1% in 2008, up from 11.7% in 2007, before it declines to 9.1% in 2009. Risks to this forecast are weighted to the upside.
• The Economist Intelligence Unit expects real GDP growth to decelerate modestly from 4.6% in 2007 to 4.4% in 2008 and 4% in 2009, owing to declining private consumption and investment growth.
• Stronger than expected first-quarter export earnings have prompted us to revise up our forecast for the 2008 current-account surplus to 10% of GDP, previously 9%. We expect a surplus of 8.6% of GDP 2009.

Monthly review

• The political stalemate between the government and regional opposition leaders has persisted as regional autonomy votes in the departments of Beni and Pando took place amid incidents of violence and accusations of intimidation.
• The president, Evo Morales, and the opposition-controlled Senate agreed to hold a national recall vote on August 10th. The vote will ratify or reject Mr Morales, his vice-president, Alvaro Garcia, and the nine regional governors.
• Robust revenue growth in the first quarter of 2008 has produced a fiscal surplus of 2.5% of GDP despite rapid spending growth.
• The consumer price index (CPI) rose by 1.87% in May, bringing the 12-month rate to a new high of 16.9%, more than twice the anticipated official rate for the year.
• Export earnings growth has gathered pace in January-April with revenue rising by 58.3% year on year to US$2.05bn. Mineral exports grew the fastest owing mainly to the opening of Apex Silver's San Cristobal mine in late 2007.

SOURCE: Country Report