Boston, MA -- (SBWIRE) -- 10/30/2013 -- We believe that Colombia's economy will expand at robust growth rates in the coming years, characterised by improved macroeconomic conditions and an increasingly friendly business environment.

Private consumption, while moderating, will drive the majority of growth, although gross fixed capital formation (GFCF) will play an increasingly important role over the coming quarters.

The infrastructure, mining and hydrocarbons sectors are particularly well positioned for growth.

Major Forecast Changes

We have revised down our average exchange rate forecast from COP1,865/US$ to COP1,873/US$ in 2013 and from COP1,875/ US$ to COP1,880/US$ in 2014. The main factor underpinning our revision is the depreciatory impact of building expectations for a normalisation in monetary policy in the US, and ongoing intervention by the Colombian central bank.

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We revised our fiscal deficit forecast from 1.9% to 2.4% of GDP in 2013 and from 2.0% to 2.6% of GDP in 2014. The main factors underpinning our expectations for a wider budget shortfall are our June downgrade of real GDP growth and recently approved additional government stimulus.

Key Risks To Outlook

Upside Risks: Elevated foreign investment inflows into the country following Colombia's upgrade to 'investment grade' by all three major ratings agencies could drive growth even faster than expected. In addition, a successful agreement during the ongoing peace negotiations between the government and the country's main left-wing insurgent group, the Fuerzas Armadas Revolucionarias de Colombia (Farc), would likely result in even greater foreign investment as risk perception improves.

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