BMI View: Surging hydrocarbons and soy exports are driving robust growth in Bolivian goods exports, prompting us to revise up our forecast for real GDP growth in 2013 and 2014 . Indeed, we note that investment in the country's extractive s ectors remain s strong despite a poor business environment , suggesting this trend will continue . Moreover, Bolivia is likely to benefit from growing demand from its key export markets.
Exports have become an increasingly significant contributor to Bolivia's economic growth in recent quarters, a trend we expect will continue in 2013 and 2014 on account of our Oil & Gas (O&G) team's view that the country's hydrocarbons industry, which makes up over 40.0% of total exports, will continue to see investment despite wider concerns over a poor business environment ( see 'O&G Investment Endures Despite Business Environment Woes,' March 28). Indeed, we forecast export growth of 12.0% in both 2013 and 2014, following estimated growth of 11.0% in 2012. Moreover, our Commodities team expects that Bolivia's soy production will increase in 2013, driven by good weather conditions, which have encouraged Bolivian producers to plant as much as they can. Soy exports, which are Bolivia's largest agricultural export, grew by 16.8% percent in 2011, up from 7.1% in 2010.
|Real Exports On The Rise|
|Bolivia - Contribution Of Real Exports To Real GDP Growth|
Strong goods exports are a key part of our forecast for real exports of goods and services combined to grow by 7.1% this yea r, and we have revised up our 2013 and 2014 headline growth forecasts to 5.2% and 5.0%, from 4.6% and 4.5%, respectively, to reflect Bolivia's strengthening external position. Indeed, the contribution of real exports of goods and services to real GDP growth has increased in recent quarters, growing from 1.9 percentage points (pp) in Q411 to 3.8pp in Q412, and growth in real exports contributed to real GDP growth coming in at 5.2% in 2012, slightly above our estimate of 4.8%.
|Growth In Hydrocarbons Is Key|
|Bolivia - Exports By Sector, US$mn|
Additionally, further underpinning our forecast for strong export growth is that Bolivia is likely to benefit from improving external demand in some of its key export markets. Although we have recently downgraded our 2013 real GDP growth forecast for Brazil, which consumed 40.3% of Bolivia's exports last year, we still expect imports of goods to grow by 6.7% in 2013 and 5.9% in 2014, after contracting by 1.4% in 2012. Moreover, annual growth in exports to China has averaged 51.3% over the past decade, and our O&G team expects China's demand for new sources of energy will continue to expand, suggesting more room for growth in hydrocarbons imports from Bolivia.
Risks To Outlook
As we have previously noted, our O&G team places Bolivia second to last in Latin America in BMI's Oil & Gas Risk/Reward Ratings, and given the rise of government interventions since 2011, we believe investor sentiment could still dampen in the coming years ( see 'Unyielding Investment To Sustain Growth,' April 5). A substantial drop in fixed investment would slow the development of the country's extractive sectors, weighing on exports. Furthermore, although Bolivia's exports of silver, the country's second largest export commodity, have shown steady growth in recent years, our Commodities team believes prices for precious metals are unlikely to achieve their highs of the past few years, negatively affecting exports.