Boston, MA -- (SBWIRE) -- 05/01/2014 -- 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.
Stronger private consumption 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.
We expect President Juan Manuel Santos to win re-election in May, and anticipate broad policy continuity throughout the next administration.
Major Forecast Changes
We have revised our real 2014 real GDP growth forecast from 4.4% to 4.3%, following a downward adjustment to our 2013 growth estimate, from 4.3% to 4.1%, due to weaker-than-expected economic activity in Q413.
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The Colombian peso weakened more than we expected this year, prompting us to revise our 2014 average exchange rate forecast from COP1,880/US$ to COP1,980/US$, implying a 5.9% depreciation from last year's average exchange rate of COP1,869/US$.
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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