BMI sees little chance of Colombia avoiding a recession in 2009 as the twin engines of growth in recentyears - private consumption and fixed investment - feel the brunt of collapsing consumer confidence, theglobal downturn and ongoing risk aversion. We are, therefore, forecasting that Colombia will experiencean economic contraction of 1.5% this year, the country’s first contraction since 1999, which compares togrowth of 3.4% in 2008 and 7.6% in 2007.
According to the country’s national statistics office, retail sales grew by just 0.5% in 2008, down fromgrowth of 11% in 2007, with growth well into negative territory in the latter stages of the year. This isclearly an ominous signal for the country’s retailers, and BMI is expecting total mass grocery retail salesto stagnate in 2009. Any increase in sales is likely to be driven by new store openings, rather than by asignificant increase in like-for-like sales.
Indeed, in the last quarter, the country’s two largest retailers have both announced plans to rein inexpansion over the course of this year. Almacenes Exito, which is a subsidiary of France-based Casino,has stated it will invest COP190bn (US$81.5mn) in 2009, down from COP500bn (US$214.7mn) in 2008.
Meanwhile, the Colombian unit of Carrefour has revealed it will invest EUR100mn (US$129.3mn) in2009, compared with EUR200mn (US$248.7mn) in 2008. However, strong growth is still expected infood consumption in Colombia over the next five years. By 2013, total food consumption is expected torise by 47.8% (nominal growth rate in local currency terms), stemming from a projected 36.5% increasein per-capita spending and an 8.3% increase in the size of the population. Using BMI forecasts for theCOP/US$ exchange rate, this translates into total food consumption growth of 107.9% in US dollar termsas the Colombian peso is forecast to strengthen considerably against the US dollar over the next fiveyears. This growth will be driven by increased demand for value-added and premium products for themost part.
Colombia is the world’s third-largest coffee producer. At the end of March, the National Federation ofCoffee Growers reported that Colombian coffee shortages will start to ease by August, with volumesnormalising by September as the mid-year crop from southern and northern regions is delivered.
Production was down 9% y-o-y in 2008, as a result of poor weather and high input prices associated withthe global commodities bubble. The federation said its 2009 first half crop would be around 4.5mn bags,down 1.5mn bags from a year earlier, but said strong recent flowering indicated a normal second half ofthe year. Production for 2009 is seen at more than 11mn 60-kilogram bags. Colombia is a major supplierof some of the best Arabica coffee in the world and hopes to increase production to 17mn bags by 2014,which, given the current economic climate, seems an overly ambitious target, particularly as the highdemandspeciality coffee sector, which is hoped will drive growth, is likely to be the worst affected interms of consumer demand.
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