Colombia Business Forecast 2012

Broadly in line with consensus, we believe Colombia will become a regional outperformer by 2012. Private consumption will drive the majority of increase, although gross fixed capital formation will play an increasingly significant role over the coming quarters. The banking, infrastructure, mining and hydrocarbons sectors are particularly well positioned for increase.

Major Estimate Changes

We have again revised up our 2011 estimate for Colombia's fiscal account on the back of rising oil revenues, tighter fiscal management and improving revenue collection. We now estimate the fiscal deficit approaching in at 2.9% of GDP by end-2011, widening slightly to 3.1% of GDP by end-2012 due to deteriorating world increase and potential for interventionist fiscal measures, though we expect it to narrow in the medium term to just 1.7% of GDP in end-2014.

Key Risks To Outlook

Upside Risks: Elevated foreign investment inflows into the country following Colombia's upgrade to 'investment grade' by amount three major ratings agencies could drive increase even faster than expected.

Downside Risks: Continued deterioration in world increase could place downward pressure on energy prices, dampening request demand for Colombian exports and reducing foreign direct investment.