Colombia Country Risk Report

Providing comprehensive data and in-depth analysis of political, financial and economic risk.

Report includes: BMI's Core Views, 10-year Forecasts, BMI's Economic Risk Index, Political Stability and Risk Index, Long-term Political Outlook, Operational Risk Index, SWOT Analysis and Structural Economic Sections

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  • Understand and measure the political, business environment and operational risks to your company
  • Gain insight on emerging trends that could support, strengthen or disrupt your activities in the market
  • Benefit from 10-year macroeconomic forecasts and insight into the structural characteristics of the economy
  • Get the long-term political outlook and explore possible scenarios for change
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Colombia Country Risk Report
Product Price
$1,195.00

Core Views:

  • Persistent weakness in benchmark crude prices will continue to undermine real export growth and fixed investment, helping to underpin our view for structurally slower growth over the next several years.

  • We also anticipate a slowdown in real private consumption growth as consumers are hit hard by high inflation, rising interest rates and a significant sell-off in the exchange rate.

  • Hydrocarbon sector weakness will also weigh on Colombia's balance of payment position. Faltering oil prices and production will temper investment into Colombia and cool export growth.

  • Meanwhile, slower oil production growth combined with increasing pressure to spend on social programmes will feed through to fiscal slippage in the years ahead. While the country is well positioned to withstand the storm, with a relatively low external debt burden and a sizeable stock of foreign reserves, the potential for deterioration in the country's macroeconomic buffers will temper investor perceptions of Colombia's sovereign creditworthiness.

  • The government and Fuerzas Armadas Revolucionarias de Colombia will reach a peace accord in H116, broadly in line with their stated timeline. However, given the splintered nature of the left-wing insurgent group, such a deal will only slowly improve the security environment.

Major Forecast Changes:

  • Greater than expected weakness in oil prices has prompted us to revise down our 2016 exchange rate forecast. We now forecast the unit to average COP3,287/USD in 2016, from COP3,050/USD previously, and considerably weaker than the 2015 average of COP2,749/USD.

  • Signs that inflation will remain well above the central bank's target band in 2016, combined with the bank's stated willingness to tighten monetary policy, we have revised up our policy rate forecast for 2016. We expect the bank to raise the benchmark rate by 75 basis points to 6.50% by end-2016.

Key Risks:

  • A sharper decline in oil prices than we currently expect in 2016, likely on the back of increasingly poor macroeconomic data from the US or China, could significantly undermine Colombia's growth, fiscal and balance of payments outlooks over the coming 12 months. A further, extended decline in crude prices would depress export growth, as well as stymieing investment into the oil sector, likely resulting in a drop in production. Further deterioration in the country's balance of payments dynamics will likely precipitate additional currency weakness, stoking inflation and undermining consumers' purchasing power.

Macroeconomic Forecasts (Colombia 2014-2017)
2014 2015e 2016f 2017f
e/f = BMI estimate/forecast; Source: National Sources, BMI
Nominal GDP, USDbn 377.6 296.5 267.3 292.1
Real GDP growth, % y-o-y 4.6 2.9 2.9 3.3
Consumer price inflation, % y-o-y, eop 3.7 6.8 4.6 3.5
Exchange rate COP/USD, eop 2,376.51 3,174.50 3,400.00 3,050.00
Budget balance, % of GDP -2.6 -3.1 -3.6 -3.4
Current account balance, % of GDP -5.2 -6.7 -6.4 -6.2
Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
Transitional Justice Agreement Signals Conclusion To Peace Talks Ahead
8
TABLE: POLITICAL OVERVIEW
8
Long-Term Political Outlook
9
Many Structural Challenges Ahead
9
Chapter 2: Economic Outlook
11
SWOT Analysis
11
BMI Economic Risk Index
11
Economic Activity
12
Only Modest Economic Acceleration Ahead
12
TABLE: PRIVATE CONSUMPTION FORECASTS
12
GDP By Expenditure Outlook
13
TABLE: GOVERNMENT CONSUMPTION FORECASTS
13
TABLE: FIXED INVESTMENT FORECASTS
14
TABLE: NET EXPORTS FORECASTS
14
Balance Of Payments
15
Peso Plunge Insufficient To Support Export Competitiveness
15
Outlook On External Position
16
TABLE: CURRENT ACCOUNT
16
Fiscal Policy
17
Fiscal Deficit Will Widen In 2016
17
TABLE: FISCAL OVERVIEW
18
Monetary Policy
19
Hiking Cycle To Continue Amid Growing Inflationary Concerns
19
TABLE: MONETARY POLICY
21
TABLE: WEIGHTING OF CPI, %
21
Currency Forecast
22
COP: Weakness To Persist Into 2016
22
TABLE: BMI CURRENCY FORECAST
22
Chapter 3: 10-Year Forecast
25
The Colombian Economy To 2024
25
Structurally Weaker Growth Following Oil Bust
25
TABLE: LONG-TERM MACROECONOMIC FORECASTS
25
Chapter 4: Operational Risk
29
SWOT Analysis
29
Operational Risk Index
29
Operational Risk
30
TABLE: OPERATIONAL RISK
30
Education
32
TABLE: EDUCATION RISK
32
TABLE: GRADUATES OF TERTIARY EDUCATION
33
Government Intervention
37
TABLE: GOVERNMENT INTERVENTION RISK
37
TABLE: INCOME TAX RATE (FOR RESIDENTS)
38
Chapter 5: BMI Global Macro Outlook
41
Global Outlook
41
Global Growth Weak As EMs Squeezed
41
TABLE: GLOBAL ASSUMPTIONS
41
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
42
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
42
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
43

Assess your risk exposure in Colombia with our 100% independent forecasts assessing the pace and stability of this key market. Backed by trusted data from BMI Research's 52 million data point economic forecast model, this report will allow you to measure political, economic, business environment and operational risks in Colombia with confidence.

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