Country Report Colombia December 2008

Outlook for 2009-10

• Mr Uribe's high popularity will be eroded by the economic downturn and we now no longer expect him to stand for a third term in May 2010 (but this is not ruled out). We assume a centre-right candidate will win, providing continuity.
• Policymaking will become much more challenging in the remainder of 2008-10, as fiscal and current-account deficits leave Colombia exposed to global financial and economic woes.
• We expect policymakers to prioritise macroeconomic stability over growth, notwithstanding the 2010 elections.
• The impact of the economic slowdown on revenue and spending pressures will contribute to a widening of the NFPS deficit from an estimated 1.5% of GDP in 2008 to 2.5% in 2009 and 2.6% in 2010.
• After slowing in 2008 to 2.8%, GDP growth will weaken further in 2009 to 1.8% as the global recession bites. A mild global economic recovery and Colombian policy easing will help to lift GDP growth to 2.6% in 2010.
• Following the deepening of the global credit crisis in September and October, and global recession in 2009, we expect the peso to be weaker than previously forecast, ending 2009 at Ps2,501:US$1 and 2010 at Ps2,531:US$1.

Monthly review

• Mr Uribe has suffered a number of setbacks in recent weeks that carry the potential to inflict more damage to his position than any other difficulties he has faced since he took office in August 2002.
• The government has been rocked by the collapse of illegal pyramid schemes, in which around 2m people have deposited over Ps2trn (US$900m; 0.5% of GDP).
• In January-October tax revenue grew by 11.8% year on year, a deceleration from 13.2% in the first half. The government achieved 99.6% of its tax revenue target for January-October with total receipts of Ps57.1trn.
• In late November Congress approved re-election referendum legislation, but in its current form Mr Uribe would not be able to stand in 2010.
• The central bank kept interest rates unchanged at 10% on November 21st but set a higher inflation rate target for 2009, of 5% (plus or minus 0.5 percentage points), than that in 2008, of 4% (plus or minus 0.5 percentage points).
• In September manufacturing output and real retail sales contracted by 3.3% and 2.5% year on year, respectively, as the deceleration continues. Vehicle sales fell by 10.3% in January-October year on year.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;47;15;70
NAICS Code: 52;48;23;72;11