Private Consumption: Household consumption as a share of GDP will largely hold steady in the coming decade, at --.- in ---- from --.- in ----. As the biggest single growth driver, headline GDP will remain highly sensitive to shifts in household spending patterns. ...Household consumption growth will benefit from favourable demographics, with the country s dependency ratio (the proportion of children and retirees compared to the working age population), hitting its low point in ----. Furthermore, despite increased pressure on peace negotiations between the Fuerzas Armadas Revolucionarias de Colombia (FARC) and Colombian government due to the recent resurgence in violence, our core view remains for an agreement between the two during President Juan Manuel Santos second term in office, most likely in H---. This will support increased rural development, feeding through to greater investment, job creation and household spending power for some of the poorest citizens. ...That said, this will be increasingly offset by the country s major infrastructure investment projects, especially the major -G road development project. Toward the latter part of our forecast period, we note that as Colombia begins to develop -- Business Monitor International Ltd www.bmiresearch.com
...A slowdown in the growth of import volumes will provide a respite to Colombia s net exports position, which was hit hard by two consecutive contractions in real exports in ---- and ----. Relatively buoyant domestic demand and elevated food imports, precipitated by the El Nino weather pattern, helped to support imports in ----. ...Outlook Will Brighten Only Modestly In ---- With oil prices set to remain structurally low, we see only mod- erate upside for real GDP growth in ----. Private consumption and fixed investment growth will remain well below recent highs, as companies pare back investments in light of the low oil price environment, while consumers struggle with an erosion of their purchasing power following a few years of high inflation. Nev- ertheless, we believe that there will be a significant reduction in the cost of production in Colombia, as the peso sells off. Despite significant structural issues, increased export competiveness will provide a greater tailwind to exports and investment beginning in ----. As a result, we see headline growth accelerating to -.- in ---- and averaging -.- between ---- and ----.
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