Country Report Colombia April 2009

Summary

Regardless of whether Mr Uribe is able to stand for re-election, we expect that a centre-right candidate will win the May 2010 presidential election, providing policy continuity, although the downturn could make for a close contest.
Fiscal and current-account deficits leave Colombia's economy particularly exposed to the global economic downturn. We expect policymakers to prioritise macroeconomic stability over growth, despite the electoral calendar.
The impact of the economic slowdown on revenue and spending pressures will contribute to a widening of the NFPS balance from an estimated small surplus in 2008 to a deficit of 3.3% in 2009, narrowing to 2.6% of GDP in 2010.
Real GDP will contract by 3% in 2009, the first contraction since 1999. A mild global recovery and Colombian monetary easing will help to lift GDP to growth of 1.5% in 2010.
Despite intervention by the central bank, lower foreign exchange inflows will weaken the peso, ending 2009 at Ps2,579:US$1 and 2010 at Ps2,615:US$1.
The current-account deficit will widen to 4% of GDP in 2009 owing to falling export earnings, narrowing in 2010 as terms of trade improve.

Mr Uribe has still not confirmed whether he plans to run for a third term, but judging by recent manoeuvres it now appears that he does. He is trying to group his congressional supporters into one party to improve discipline.
The opposition parties on the left of the political spectrum are becoming increasingly divided. The PL party has had to postpone its primary election to select its presidential candidate, which was due in March.
The government has revised down its official GDP growth forecast for 2009 from 3% to a range of 0.5-1.5% and now expects the deficits of the central government and the combined public sector to reach 3.7% and 2.6% of GDP.
The central bank continued its easing cycle, cutting rates by another 100 basis points to 7% at its March 20th monthly meeting, accumulating 300 basis points in cuts since December.
After a contraction of 0.7% in the fourth-quarter 2008, leading indicators point to continued weakness: retail sales falling by 4.5% and manufacturing output by 11% in January, and consumer confidence turning negative in February.
The downturn in manufacturing continued with output dropping by 10.8% in January (compared with falls of 9.5% in December and 13.2% in November), reflecting poor export performance and weak domestic demand.

Source: Country Report

This report covers the following industry codes:
SIC Code: 15;39
NAICS Code: 23;31