Q413 GDP Print Reaffirms Bright Outlook

BMI View: Real GDP growth in Colombia came in at 4.3% in 2013, above our 4.1% estimate, prompting us to make upward revisions to our growth outlook. We now forecast real GDP growth of 4.6% in 2014 and 4.7% in 2015, compared to 4.5% and 4.7% previously. The main drivers of a faster expansion in real GDP growth will be robust private consumption and export growth.

Colombian real GDP grew by 4.9% year-on-year (y-o-y) in Q413, down from 5.4% y-o-y in Q313 as gross fixed capital investment growth moderated. However, the Q413 GDP print, combined with data revisions of past quarters by the national statistics agency (DANE), put annual real GDP growth at 4.3% in 2013, slightly above our 4.1% estimate. As a result, we have made upward adjustments to our growth outlook and now forecast real GDP to expand by 4.6% in 2014 and 4.7% in 2015, compared to our previous 4.5% and 4.7% growth projections for those years. We continue to expect the main drivers of stronger real GDP growth to be a gradual acceleration in real private consumption and robust export performance, especially in the coal sector ( see' Growth To Re-Accelerate In 2014 And 2015 As Consumption And Exports Pick Up', February 26).

Consumer Spending Will Gradually Accelerate

2014 Will Be Another Year Of Strong Growth
Colombia - Real GDP Growth

Q413 GDP Print Reaffirms Bright Outlook

BMI View: Real GDP growth in Colombia came in at 4.3% in 2013, above our 4.1% estimate, prompting us to make upward revisions to our growth outlook. We now forecast real GDP growth of 4.6% in 2014 and 4.7% in 2015, compared to 4.5% and 4.7% previously. The main drivers of a faster expansion in real GDP growth will be robust private consumption and export growth.

Colombian real GDP grew by 4.9% year-on-year (y-o-y) in Q413, down from 5.4% y-o-y in Q313 as gross fixed capital investment growth moderated. However, the Q413 GDP print, combined with data revisions of past quarters by the national statistics agency (DANE), put annual real GDP growth at 4.3% in 2013, slightly above our 4.1% estimate. As a result, we have made upward adjustments to our growth outlook and now forecast real GDP to expand by 4.6% in 2014 and 4.7% in 2015, compared to our previous 4.5% and 4.7% growth projections for those years. We continue to expect the main drivers of stronger real GDP growth to be a gradual acceleration in real private consumption and robust export performance, especially in the coal sector ( see' Growth To Re-Accelerate In 2014 And 2015 As Consumption And Exports Pick Up', February 26).

2014 Will Be Another Year Of Strong Growth
Colombia - Real GDP Growth

Consumer Spending Will Gradually Accelerate

We forecast real private consumption to expand by 4.6% in 2014 and 4.8% in 2015, up from 4.5% in 2013, as a two-year long household deleveraging cycle comes to an end this year. Indeed, while household spending growth has moderated since peaking in late 2011, we believe that improving labour dynamics, combined with record low interest rates, will drive a re-acceleration in private consumption growth this year ( see 'Consumer To Strengthen As Labour Dynamics Continue To Improve', February 19). In addition, rising access to finance, as banking sector networks expand across the country, will also support stronger credit-fuelled consumer spending ( see 'Rapidly Expanding Banking Sector Still Has Room To Go', September 17 2013).

Household Spending Will Pick Up
Colombia - Real Private Consumption Growth

Export Growth To Rise On The Back Of Stronger Coal Production

We forecast exports of goods and services to expand by 5.5% in 2014 and 8.0% in 2015 in real terms, up from 5.3% in 2013.The main driver of stronger export growth will be an improvement in the coal sector, after production contracted by 4.1% in 2013 due to labour-related disruptions. Indeed, our Mining team forecasts coal production to expand by 6.0% this year, which will contribute to faster export growth given strengthening European demand for Colombian thermal coal.

Coal Exports Will Recover From Labour Disruptions Last Year
Colombia - Real Export Growth

Risks To Outlook

The risks to our growth outlook are weighted to the downside. With a presidential election on May 25, the labour disruptions that took place across several sectors of the country throughout 2013 could erupt once again. In particular, agricultural workers, who in mid-march took to the street to demand greater government support, could gain traction and disrupt production. Other sectors, such as coal, also face risks of labour strikes, as unions utilise political leverage in the run up to the presidential election to seek greater support from the government and mining companies operating in the country. Industrial action in either of those sectors would weigh on export growth, and could feed-through to weaker private consumption as labour dynamics deteriorate.

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