|
Domestic demand to receive boost
from consumption pickup
The government estimates that economic growth slowed to between 1.5% and
1.7% last year from 2.8% in 2000, as the country’s key export sectors,
coffee and oil, experienced strong contractions and domestic demand
remained subdued. The new figure is well below the 2.1% to 2.4% growth
estimate from July, which had adjusted the output expansion downward from
the 3.8% agreed to under the terms of the US$ 1.5 billion Extended Fund
Facility (EFF) with the International Monetary Fund (IMF) approved in
December 1999.
Recent data suggest that the trend to slower growth continued in the
fourth quarter of last year. According to the National Statistical
Department (DANE), manufacturing output dropped 4.2% in November over the
same month in 2000, which was down further from the 1.3% contraction
experienced in October. The November figure brought accumulated growth
through November down to just 0.89%. The strongest contractions were
experienced in the clothing and textiles sectors where production in
November dropped 19.3% and 18.3% respectively over the same month in
2000. Both sectors continue to suffer the consequences of sluggish
domestic consumption. The strongest growth was experienced in the
transport equipment and scientific equipment production, which rose 29.7%
and 24.2% respectively. Panellists expect industrial growth to have
decelerated significantly to 2.3% in 2001, which is down from a 9.5%
expansion in 2000.
Retail sales figures indicate that consumption began to pick up at the end
of the year. Real retail sales increased 5.4% in November over the same
month in 2000, which was up from 4.6% in October. The strongest growth
rates were observed in office furniture and equipment sales, which rose
36.9% over November 2000 followed by automobile sales, which jumped
22.0%. On the downside, pharmaceutical and automobile parts sales dropped
4.5% and 1.0% respectively. The more recent December retail survey of the
National Retailers Federation (FENALCO) indicates that consumption is
accelerating. Of the total businesses surveyed 42.3% claimed that real
retail sales rose in the third quarter when compared with the same period
in 2000, which was up from 41.0% for the third quarter. The FENALCO
survey shows further that business confidence has also improved. The
share of businesses that were optimistic about a pickup in sales in the
next six months rose from 36% in November to 47% in December. Favouring a
further pickup in consumption is the current downward trend in
unemployment, which dropped from 19.7% at the end of in 2000 to 16.7% in
December 2001. The government expects unemployment to drop this year to
between 15% and 15.4%, which when combined with lower interest rates is
likely to further boost consumption.
The government’s current estimate for GDP growth last year is now on par
with the Consensus figure, which sees economic growth to have reached
1.6%. Growth is expected to pick up this year as consumption rebounds and
export oriented industry receives a boost from a turnaround in the U.S.
economy. However, further progress on structural reforms and economic
prospects in neighbouring export markets, particularly Venezuela, will be
key determinants of the scope of the economic rebound. The Consensus sees
growth remaining modest in the first quarter but beginning to pick up in
the second quarter. The favourable growth scenario will persist into the
second half and lift economic growth this year.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Colombia. For more details please click here.
|
