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Export engine stalled by lower
regional demand and traditional export slump
According to the Ministry of Trade, exports were down 2.5% in November
over November 2001, which represented a deterioration compared to the 5.2%
expansion observed in October. Imports, on the other hand, continued along
a strong expansion path with growth of 6.0% in November over the same
month in 2001. As a result, the annual trade deficit widened from US$ 700
million in October to US$ 790 million in November. The unfavourable export
scenario is likely to have persisted into the last month of the year, as
sales to Venezuela have come to a virtual standstill, amid the shutdown of
that country’s economy due to the nationwide strike. In 2001, Venezuelan
exports accounted for 14.1% of total exports in 2001, second in rank of
primary export destinations after the United States, which accounts for
42.7%, and right before Ecuador, which accounts for 5.7%. The more
moderate growth in the United States and stagnation in exports to
Venezuela are key factors behind the current slump in the export sector.
Participants anticipate exports to have declined 1.1% last year. According
to the Consensus, last year’s subdued export performance is likely to
reverse this year, despite the likelihood that Venezuela will drag down
export growth, as a pickup in the United States and continued healthy
growth in other markets will drive exports up by 4.4%. Heightened domestic
economic activity will boost imports, which will expand at a 4.1% pace. As
a result, the trade balance will register a US$ 194 million surplus this
year.
Economic activity likely to have
slowed in the final quarter of 2002
The adverse impact of accelerated currency depreciation on real incomes
and high unemployment (15.7% in December 2002) were only partially offset
last year by historically low interest rates. As a consequence,
consumption is likely to have remained subdued. DANE reports that real
retail sales (excluding fuel sales) rose 1.67% in November over the same
month in 2001. The November figure was up from the meek 0.04% growth
registered in October but indicates that private consumption slowed at the
end of the year. Considering the government’s efforts to maintain strict
fiscal discipline, total consumption is likely to have slowed from 2.2%
annual growth in the third quarter to 1.6% in the last quarter.
Similarly, trade data show that investment may have dropped significantly
in the last quarter. In November, annual capital goods imports were down
7.8% over the same month in 2001, which was down from a 6.5% annual
contraction observed in October. Participants expect investment to have
dropped 3.0% in the final quarter of last year over the same quarter in
2001, which represents a major slowdown in activity when compared to the
strong 10.6% expansion observed in the third quarter.
As a result of the decline in domestic demand, economic activity is
anticipated to have remained subdued in the final quarter with a 1.9%
expansion. Thus, annual growth is likely to have reached just 1.6% last
year, up only slightly from the meagre 1.4% expansion observed in 2001 and
on par with the government’s estimate. Despite heightened prospects for
further currency deterioration, rising inflation and higher interest
rates, participants see economic activity picking up speed this year with
growth reaching 2.3%, which is just above the government’s estimate.
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