Boston, MA -- (SBWIRE) -- 03/19/2013 -- Colombia's auto industry experienced a disappointing 2012, with new vehicle sales falling 3% year-onyear (y-o-y) in the first 10 months of the year, to just 260,013 units, according to the Automotive Chamber of the National Business Association of Colombia (ANDI). BMI has become increasingly bearish on vehicle sales in the country over the course of the past year, estimating a fall of 3% in sales in 2012, based on a reduction in consumer spending brought about by tightening credit availability and the depreciation of the Colombian peso, which will make imported vehicles more expensive.

For 2013, however, BMI adopts a more bullish outlook, forecasting growth of 3% in vehicle sales, as the currency strengthens and private consumption growth picks up. Indeed, BMI's Macroeconomic team believes that Colombia's economy will remain one of the best performing in Latin America in 2013, driven by strong levels of consumption and investment. Despite ongoing household deleveraging amid record high levels of household debt, we forecast real private consumption growth to come in at 4.0%, buoyed by supportive credit growth, a relatively strong currency and improvements in the labour market.

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In addition, Colombia's attractive oil and gas, mining, and infrastructure sectors will continue to draw significant investment, further bolstering the country's economic performance. We therefore forecast real GDP growth to come in at 4.3% in 2013, broadly in line with our 2012 forecast of 4.4%.

Further underlining our upbeat stance towards the Colombian auto sector in 2013 was the news in December 2012 that the European Parliament has approved a Free Trade Agreement (FTA) with Peru and Colombia. It is expected that this agreement will take effect in Q113. BMI believes that this will boost autos imports from Europe to Peru and Colombia, providing some upside risk to our European production forecasts and sales outlooks for both Peru and Colombia. This follows the successful conclusion of another FTA with South Korea in June 2012, which should see a further increase in Korean auto imports into Colombia over the short to medium term.

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