Country Report Bolivia February 2010

Outlook for 2010-11

• The president, Evo Morales, will use a two-thirds legislative majority to further entrench a populist-socialist agenda in 2010-11, although inefficiencies and a lack of private investment will limit economic growth and job creation.
• Mr Morales will remain aligned with the nationalist-leftist bent of Venezuela's Hugo Chavez in foreign policy. Ideological tensions will impair trade and investment links with the US and other traditional Western allies.
• Stagnant hydrocarbons revenue and public-spending growth will increase the fiscal deficit to 2.5% of GDP in 2010 and 3% in 2011. These will be financed with a mix of official and domestic lending and reserves.
• Bolivia's economy has been boosted by robust government spending. However, a lack of investment in productive sectors and little job creation will limit GDP growth to 3.4% in 2010 before it falls to 3.2% in 2011.
• Rising import prices and an expected (if slight) exchange-rate depreciation during 2010 will cause annual inflation to rise steadily from its current lows to end 2010 at 4.2% and 2011 at 5%.
• The current-account surplus will drop to 2.8% in 2010 and 2011, as export earnings remain weak (owing to stagnant gas production and weak prices), import costs rise and the transfers surplus rebounds weakly.

Monthly review

• The right-wing opposition's position has worsened markedly since December with the flight into exile of two leading opposition politicians of the PPB-CN party. Both had been put under investigation by the government.
• In January the minister of finance estimated that the fiscal surplus narrowed sharply from 3.2% of GDP in 2008 to near balance for 2009, and envisaged a widening to a deficit of 4.5% of GDP in 2010 as revenue is stagnant.
• The government has announced that the nationalisation of Bolivia's two privately run pension fund managers will be a main economic policy initiative for 2010.
• Preliminary results show that real GDP grew by 3.2% year on year in January-September and that the economy continued to be supported by growth in private consumption, although this is waning.
• The government estimated that real GDP expanded by 3.5% year on year in 2009. An up-tick in the fourth quarter is likely owing to the acceleration of spending before the December election.

Source: Country Report

• Highlights
• Outlook for 2010-11: Domestic politics
• Outlook for 2010-11: International relations
• Outlook for 2010-11: Policy trends
• Outlook for 2010-11: Fiscal policy
• Outlook for 2010-11: Monetary policy
• Outlook for 2010-11: International assumptions
• Outlook for 2010-11: Economic growth
• Outlook for 2010-11: Inflation
• Outlook for 2010-11: Exchange rates
• Outlook for 2010-11: External sector
• Outlook for 2010-11: Forecast summary
• The political scene: New cabinet reflects role of social movements and women
• The political scene: Key cabinet members remain
• The political scene: Local elections will further boost the government
• The political scene: Opposition leaders flee judicial proceedings
• Economic policy: Expansionary policies set to weaken the public finances
• Economic policy: Pension nationalisation is planned
• Economic performance: Private consumption still helping to underpin growth
• Economic performance: GDP growth expected to have ticked up in the fourth quarter
• Economic performance: Banking enjoys a bumper year
• Data and charts: Annual data and forecast
• Data and charts: Quarterly data
• Data and charts: Monthly data
• Data and charts: Annual trends charts
• Data and charts: Monthly trends charts
• Data and charts: Comparative economic indicators
• Basic data
• Political structure