Country Report Bolivia March 2009

Outlook for 2009-10

• Presidential and legislative elections are due to take place on December 6th 2009, with Evo Morales favourite to be re-elected. Opposition candidates will do well in eastern regions, sustaining deep regional cleavages.
• The suspension of Bolivia's preferential trade access to the US under ATPDEA will hit manufacturing and exports. Any change of stance from the US toward Bolivia will depend on compromises from the Bolivian government.
• Government plans to use savings to boost spending, coupled with falling revenue from extractive industries, has prompted us to downgrade our fiscal forecast to NFPS deficits of 3.8% of GDP in 2009 and 2.2% in 2010.
• Collapsing industrial production in OECD countries is hitting emerging economies more severely, leading us to make further downward revisions to our forecasts for global trade and growth in 2009-10.
• An announced fiscal boost in 2009 has led us to revise up our forecast for growth this year, to 1.4%; but lower spending capacity in 2010 amid still-difficult international conditions, will lead growth to slow that year, to just 1%.
• Lower commodity prices will ease inflationary pressure in 2009, but an expansionary fiscal policy will keep annual average inflation close to 8%, curbing household incomes and impairing manufacturing competitiveness.
• We expect the current-account surplus to fall from an estimated 12.7% of GDP in 2008 to 3.2% and 3.7% in 2009 and 2010, respectively, as export earnings decline at a faster rate than imports, and remittances fall.

Monthly review

• The government is moving to implement the new constitution, introducing three new cabinet positions. The minister for hydrocarbons and energy has also been replaced to give Mr Morales a stronger ally in that ministry.
• With presidential and legislative elections under the new constitution due in December, politics is again being dominated by electoral considerations.
• A row has erupted over the composition of the so-called plurinational Congress, with the constitution requiring some seats in the Chamber of Deputies to be set aside for candidates from indigenous communities.
• Large capital spending in December reduced the fiscal surplus, which ended 2008 at an estimated 3.2% of GDP. Revenue is set to fall in 2009, but counter-cyclical spending will ensure rising expenditure.
• Commodity price peaks raised the trade and current-account surpluses in 2008, though lower prices and demand are now pointing towards a sharp narrowing of both.

Source: Country Report

This report covers the following industry codes:
SIC Code: 48;10;60;49;80;53;65;47
NAICS Code: 517;212;11;52;22;62;44;53;48