Country Report Bolivia November 2009

Outlook for 2010-11

• Evo Morales is set to be re-elected as president on December 6th 2009 with a stronger legislative mandate: despite support in eastern departments, the opposition is likely to lose its Senate majority and ability to veto legislation.
• Mr Morales will continue to emulate the nationalist leftist bent of Venezuela's Hugo Chavez in the field of foreign relations. Ideological tensions will impair trade and investment links with the US and other traditional western allies.
• Relatively stagnant hydrocarbon revenue (around 50% of fiscal income) and continued robust public spending growth will keep the fiscal deficit relatively wide at 1.8% of GDP in 2010, narrowing slightly in 2011 to 1.6%.
• Bolivia has been spared the worst of the global recession thanks to resilient demand for its commodities and robust government spending. However, a lack of investment in productive sectors will restrict medium-term growth.
• Strong fiscal expenditure (estimated to equal to around 45% of GDP) has supported economic growth in 2009. However, even if maintained, this will only be enough to produce economic growth of 3.2% in 2010-11.
• After falling sharply in 2009 amid weaker import prices and consumer demand, lax fiscal policy and higher fuel prices will raise average inflation to 4% in 2010 and 5.5% in 2011, despite a relatively strong exchange rate.
• Having fallen sharply in 2009 owing to lower export earnings and remittances, the current-account surplus is forecast to remain near 4% of GDP in 2010-11, reflecting slight rebounds in both export earnings and import spending.

Monthly review

• The latest poll results show Mr Morales with 54% of voting intentions, followed by 20% for Manfred Reyes Villa of the Plan Progreso para Bolivia (PPB), and 11% for Samuel Doria Medina, the leader of Unidad Nacional (UN).
• Regional polling results also suggest that the Movimiento al Socialismo (MAS) will gain control of the Senate from the opposition, as proportional representation would give Mr Morales's MAS at least 20 of the 36 seats.
• The latest data on the non-financial public-sector (NFPS) accounts show that the slowing economy and steep fall in export earnings caused current revenue for the first six months of 2009 to fall by 4.1% year on year.
• Figures show that a 4.1% rise in (seasonally-adjusted) GDP during the second quarter, boosted by government spending and private consumption, put total year-on-year growth for the first half at 3.2%.
• The current-account balance registered a US$388m surplus in January-June, although this was down 63.3% year on year.