Colombia: Growth strengthens during second half of 2013

311 views

Published on

• Growth decelerated in emerging economies, but a gradual recovery of developed economies consolidates
• Colombia's economy slowed during the first quarter, however it did not compromise our year end growth forecast of 4.1% of GDP. For 2014 we expect a more robust growth rate of 4.7%
• Inflation will be slightly below the mid point of the target range in 2013 (2.7%) and slightly above in 2014 (3.2%). We do not anticipate a change in the monetary stance until the second quarter of 2014
• Uncertainty regarding the timing of the withdrawl of QE3 in the US will continue to generate volatilty in local markets

Published in: Economy & Finance, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
311
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
7
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Colombia: Growth strengthens during second half of 2013

  1. 1. Growth strengthens during second half of 2013 Colombia Outlook BBVA Research Colombia August 2013
  2. 2. Página 2 Main messages • Growth decelerated in emerging economies, but a gradual recovery of developed economies consolidates • not compromise our year end growth forecast of 4.1% of GDP. For 2014 we expect a more robust growth rate of 4.7% • Inflation will be slightly below the mid point of the target range in 2013 (2.7%) and slightly above in 2014 (3.2%). We do not anticipate a change in the monetary stance until the second quarter of 2014 • Uncertainty regarding the timing of the withdrawl of QE3 in the US will continue to generate volatilty in local markets
  3. 3. Lower growth in emerging markets and uncertainty regarding withdrawl of quantitative easing in the U.S.
  4. 4. Page 4 Net flows to EM bond and equity funds (Mln dollars, four-week average) Source: EPFR and BBVA Research withdrawl was greater than expected Normalization of global financial conditions, with higher interest rates and lower demand for emerging markets Lower liquidity will have greater impact on emerging markets -40000 -30000 -20000 -10000 0 10000 20000 30000 40000 -40000 -30000 -20000 -10000 0 10000 20000 30000 40000 ene-08 abr-08 jul-08 oct-08 ene-09 abr-09 jul-09 oct-09 ene-10 abr-10 jul-10 oct-10 ene-11 abr-11 jul-11 oct-11 ene-12 abr-12 jul-12 oct-12 ene-13 abr-13 jul-13
  5. 5. Página 5 Global economy with cyclical weakness, above all in EM • We have reduced our world GDP growth forecast due to a less favorable global economic scenario. GDP Growth (Percentage) Source: BBVA Research * BBVA Eagles: Emerging and Growth-Leading Economies. China, India, Brazil, Indonesia, Korea, Russia, Turkey, Mexico, Taiwan. EM have experienced a more intense deceleration of growth Global financial tightening due to US slow recovery In 2014 we expect a 3.8% world GDP growth 3,2 3,1 3,8 2,2 1,8 2,3 -0,5 -0,4 1,0 5,1 5,2 5,6 -2,0 0,0 2,0 4,0 6,0 8,0 -2,0 0,0 2,0 4,0 6,0 8,0 12 13 14 12 13 14 12 13 14 12 13 14 Mundo EEUU Zona Euro BBVA Eagles ago-13 may-13
  6. 6. Colombia: economy will strengthen for the remainder of 2013 and 2014 even though demand remains weak
  7. 7. Página 7 Net flows towards Colombia remained robust • Domestic financial markets reacted to the anticipated change in US monetary stance. Expectations of lower global liquidity weakened COP and increased risk premia. Net capital flows (annual change, %) Source: BanRep and BBVA Research Financial volatility due to global uncertainty, with limited impact on fundamentals Period was faced with slackness even though heightened sovereign debt cost Weakeing of COP in line with the region regardless of pension funds regulatory noise-300 0 300 600 900 1200 1500 1800 -300 0 300 600 900 1200 1500 1800 mar-09 jul-09 nov-09 mar-10 jul-10 nov-10 mar-11 jul-11 nov-11 mar-12 jul-12 nov-12 mar-13 jul-13 IED Inversión en portafolio Préstamos externos
  8. 8. Página 8 Heightened construction growth (17,5% annual) held back deceleration • Domestic demand was weaker than expected due to a stronger deceleration of private consumtion and a fall in non-residential investment. A corresponding adjustment in imports was observed. GDP and domestic demand(annual change, %) Source: DANE and BBVA Research -2 0 2 4 6 8 10 -2 0 2 4 6 8 10 mar-09 jun-09 sep-09 dic-09 mar-10 jun-10 sep-10 dic-10 mar-11 jun-11 sep-11 dic-11 mar-12 jun-12 sep-12 dic-12 mar-13 Demanda interna PIB Annual variation 4Q12 1Q13 Expected? Private consumption 4,6 3,2 Private investment 5,6 3,8 Public investment 4,1 8,4 Exports 1,4 -1,2
  9. 9. Página 9 Stronger leading indicators during second quarter of 2013 • Gradual recovery of private consumption and slow growth of non-residential investment. • Industry supported by foreign and domestic demand. Available leading indicators (Seasonally adjusted, Mar10=100) Source: DANE and BBVA Research -12.2 2.8 1.2 -9.5 -3.5 16.0 6.0 1.6 -15 -10 -5 0 5 10 15 20 Minería y agro Industria Otras Total 1T13 2T13 Exports by product type Annual variation, % 90 100 110 120 130 140 150 160 170 90 100 110 120 130 140 150 160 170 mar-10 may-10 jul-10 sep-10 nov-10 ene-11 mar-11 may-11 jul-11 sep-11 nov-11 ene-12 mar-12 may-12 jul-12 sep-12 nov-12 ene-13 mar-13 may-13 Ventas minoristas Exportaciones Licencias de construcción Demanda de energía de la industria
  10. 10. Página 10 Confidence recovery anticipates a better second half of the year • Households and businesses regained optimism about economic actvity for the upcomming six months. Household and business confidence (Seasonally adjusted) Source: Fedesarrollo and BBVA Research -25 -15 -5 5 15 25 35 -25 -15 -5 5 15 25 35 mar-08 jun-08 sep-08 dic-08 mar-09 jun-09 sep-09 dic-09 mar-10 jun-10 sep-10 dic-10 mar-11 jun-11 sep-11 dic-11 mar-12 jun-12 sep-12 dic-12 mar-13 jun-13 Comerciantes Consumidores Industriales In June, households revealed a high disposition to purchase durable goods and housing Consumer confidence reached its minimum in March, anticipating a recovery. Industry has gradually reduced inventory since February
  11. 11. Further consolidation of employment will sustain recovery in private consumption Página 11 • Employment increased during 2Q13, but at a lower pace than in 2012. • Construction dynamism and industry recovery in 2H13 will allow employment to improve Formal and informal employment (Number of people, in thousands) Source: DANE and BBVA Research 3.400 3.800 4.200 4.600 5.000 5.400 3.400 3.800 4.200 4.600 5.000 5.400 Jun-07 Sep-07 Dic-07 Mar-08 Jun-08 Sep-08 Dic-08 Mar-09 Jun-09 Sep-09 Dic-09 Mar-10 Jun-10 Sep-10 Dic-10 Mar-11 Jun-11 Sep-11 Dic-11 Mar-12 Jun-12 Sep-12 Dic-12 Mar-13 Jun-13 Asalariados No asalariados
  12. 12. Heightend growth during second half of 2013 Página 12 IGAE (principal component of leading indicators) Source: BBVA Research • Favorable statistical base and improved economic dynamics will be determining factors: construction, private consumption and exports. • Economic activity index IGAE suggests a recovery for 2Q13, consistent with a year end 3.3% annual GDP growth. GDP growth forecast (annual and quarterly variation) Source: DANE and BBVA Research -4 -2 0 2 4 6 8 10 -4 -2 0 2 4 6 8 10 jun-01 dic-01 jun-02 dic-02 jun-03 dic-03 jun-04 dic-04 jun-05 dic-05 jun-06 dic-06 jun-07 dic-07 jun-08 dic-08 jun-09 dic-09 jun-10 dic-10 jun-11 dic-11 jun-12 dic-12 jun-13 PIB sin obras civiles IGAE 5.4 4.7 2.8 3.1 2.8 3.3 4.9 5.3 5.7 5.2 4.5 3.3 0.6 1.2 -0.4 1.7 0.3 1.6 1.2 2.1 0.8 1.1 0.5 1.0 -1 0 1 2 3 4 5 6 -1 0 1 2 3 4 5 6 mar-12 jun-12 sep-12 dic-12 mar-13 jun-13 sep-13 dic-13 mar-14 jun-14 sep-14 dic-14 Variación anual Variación trimestral
  13. 13. Growth for 2013 remains at 4.1% and we revised our 2014 forecast to 4.7% Página 13 • Economic growth in 2013 will be less sustained by domestic demand. • Domestic demand will grow by 3.8% in 2013, below GDP growth rate for the first time since 2009. GDP growth forecast and adjustments (annual variation and basis points change) Source: DANE and BBVA Research Construction, housing and civil works will support 1.2 pp of GDP growth rate in 2013 We have revised downwards private consumption growth, but maintain its recovery trend since 2Q13 Imports will adjust due to lower domestic demand Exports will have positive dynamics, above that of GDP growth from 2H13 onwards -0.1 -0.2 -0.4 0.3 0.1 4.1 4.7 0.0 1.0 2.0 3.0 4.0 5.0 -0.6 -0.3 0.0 0.3 0.6 0.9 2013 2014 Perspectiva externa (-) Perspectiva interna (-) Efecto de la política fiscal (+) Previsión (eje derecho)
  14. 14. We do not anticipate any change in monetary conditions until 2Q14
  15. 15. Consumer price inflation (percentage change, %) Source: DANE and BBVA Research Inflation will end 2013 in 2.7% In 2014 inflation will reach slightly above the 3% mid-range target, ending in 3.2% • Inflation will increase gradually during the second half of the year, but well within the target range for 2013 and 2014. • Low base effect and expected private consumption recovery will rise inflation in 2014. Constrained domestic demand has allowed for limited COP depreciation passthrough. Inflation remains well within the target range 1,0 1,5 2,0 2,5 3,0 3,5 4,0 4,5 5,0 1,0 1,5 2,0 2,5 3,0 3,5 4,0 4,5 5,0 sep-10 dic-10 mar-11 jun-11 sep-11 dic-11 mar-12 jun-12 sep-12 dic-12 mar-13 jun-13 sep-13 dic-13 mar-14 jun-14 sep-14 dic-14 Rango Inflación objetivo
  16. 16. Nominal intervention rate (%) Source: BanRep, DANE and BBVA Research • We expect a first interest rate hike by the central bank in April of 2014, under limited inflation pressure. • Expansive monetary stance will remain until 2015, before the gradual closure of the product gap. Reference interest rate ermains expansive (3,25% vs. 5,25% neutral). Central bank remains moderately optimistic about growth prospects Expansive monetary stance will remain during the end of the year 3,00% 3,50% 4,00% 4,50% 5,00% 5,50% 6,00% jul-13 sep-13 nov-13 ene-14 mar-14 may-14 jul-14 sep-14 nov-14 ene-15 mar-15 may-15 jul-15 sep-15 nov-15 BBVAe IBR Analistas
  17. 17. Página 17 Central Bank will extend foreign exchange purchase program • We anticipate USD 7bn of international reserves accumulation in 2013, thereby remaining USD 1bn for the 4th quarter • FX intervention will extend into 2014, with an estimated space of USD 6.4bn BanRep foreign exchange market intervention and expected reserve accumulation (annual variation, %) Source: BanRep and BBVA Research International reserves remain below level (11% vs. 15% optimum) Balance of payment equilibrium level anticipates international reserves accumulation during 2014 -1000 0 1000 2000 3000 4000 5000 6000 7000 8000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Acumulación observada (Julio) Compromiso Septiembre Proyección 2013
  18. 18. Página 18 Continued uncertainty regarding Fed QE withdrwal will increase COP volatility • COP forecast is contingent upon external monetary conditions. • COP appreciation is expected in 2014 due to economic recovery and interest rate hikes. • Normalization of external monetary conditions will depreciate COP. Average exchange rate and annual variation (pesos per dollar, %) Source: BanRep and BBVA Research 1.899 1.848 1.798 1.855 1.868 3,1 0,7 -15 -10 -5 0 5 10 15 1.500 1.550 1.600 1.650 1.700 1.750 1.800 1.850 1.900 1.950 2.000 2010 2011 2012 2013 2014 TRM promedio Variación anual promedio (eje der.) Depreciación Apreciación
  19. 19. Página 19 Main messages • Growth decelerated in emerging economies, but a gradual recovery of developed economies consolidates • economy slowed during the first quarter, however it did not comprmise our year end growth forecast of 4.1% of GDP. For 2014 we expect a more robust growth rate of 4.7% • Inflation will be slightly below the mid point of the target range in 2013 (2.7%) and slightly above in 2014 (3.2%). We do not anticipate a change in the monetary stance until the second quarter of 2014 • Uncertainty regarding the timing of the withdrawl of QE3 in the US will continue to generate volatilty in local markets
  20. 20. Página 20 Forecasts Colombia 201 1 201 2 201 3 201 4 201 5 201 6 GDP (% y/y) 6,7 4,0 4,1 4,7 5,1 5,4 Private Consumption (% y/y) 6,0 4,7 3,5 4,1 4,8 5,1 Public Consumption (% y/y) 3,6 5,1 4,6 4,8 3,5 3,9 Private Investment (% y/y) 1 7,1 8,0 4,7 7,7 6,9 6,7 Residential Investment (% y/y) 3,7 5,6 8,5 7,1 5,5 5,6 Public Investment (% y/y) 22,8 1 ,5 9,3 1 0,3 9,1 7,0 Inflation (% y/y, eop) 3,7 2,4 2,7 3,2 3,0 3,0 Exchange Rate (vs. US D, eop) 1 934 1 794 1 885 1 869 1 890 1 952 Policy Interest Rate (%, eop) 4,75 4,25 3,25 4,25 5,25 5,25 Policy Interest Rate (%, average) 4,25 4,88 3,25 3,81 5,1 9 5,25 DTF (%, eop) 5,1 2 5,22 3,74 4,58 5,73 5,86 DTF(%, average) 4,21 5,34 4,1 5 4,05 5,40 5,80 Fiscal Balance (% GDP) -2,9 -2,3 -2,6 -2,6 -2,0 -1 ,9 Current Account Balance (% GDP) -2,9 -3,2 -3,1 -2,7 -2,7 -2,9 Source: DANE, Superfinanciera, Banco de la República, Ministerio de Hacienda and BBVA Research
  21. 21. Página 21 Thanks
  22. 22. Página 22 Contacts Colombia Juana Téllez Chief Economist juana.tellez@bbva.com www.bbvaresearch.com Equipo Mauricio Hernández mauricio.hernandez@bbva.com Santiago Muñoz Santiago.munoz.trujillo@bbva.com Julio César Suárez julio.suarezl@bbva.com Interns Natalia Montes Nicolás Ronderos nataliaandrea..montes@bbva.com.co lnicolas.ronderos@bbva.com María Claudia Llanes maria.llanes@bbva.com
  23. 23. Página 23 Disclaimer This document and the information, opinions, estimates and recommendations expressed herein, have been prepared by Banco Bilbao Vizcaya Argentaria, S.A. (hereinafter called “BBVA”) to provide its customers with general information regarding the date of issue of the report and are subject to changes without prior notice. BBVA is not liable for giving notice of such changes or for updating the contents hereof. This document and its contents do not constitute an offer, invitation or solicitation to purchase or subscribe to any securities or other instruments, or to undertake or divest investments. Neither shall this document nor its contents form the basis of any contract, commitment or decision of any kind. Investors who have access to this document should be aware that the securities, instruments or investments to which it refers may not be appropriate for them due to their specific investment goals, financial positions or risk profiles, as these have not been taken into account to prepare this report.Therefore, investors should make their own investment decisions considering the said circumstances and obtaining such specialized advice as may be necessary. The content of this document is based upon information available to the public that has been obtained from sources considered to be reliable. However, such information has not been independently verified by BBVA and therefore no warranty, either express or implicit, is given regarding its accuracy, integrity or correctness. BBVA accepts no liability of any type for any direct or indirect losses arising from the use of the document or its contents. Investors should note that the past performance of securities or instruments or the historical results of investments do not guarantee future performance. The market prices of securities or instruments or the results of investments could fluctuate against the interests of investors. Investors should be aware that they could even face a loss of their investment. Transactions in futures, options and securities or high-yield securities can involve high risks and are not appropriate for every investor. Indeed, in the case of some investments, the potential losses may exceed the amount of initial investment and, in such circumstances, investors may be required to pay more money to support those losses. Thus, before undertaking any transaction with these instruments, investors should be aware of their operation, as well as the rights, liabilities and risks implied by the same and the underlying stocks. Investors should also be aware that secondary markets for the said instruments may be limited or even not exist. BBVA or any of its affiliates, as well as their respective executives and employees, may have a position in any of the securities or instruments referred to, directly or indirectly, in this document, or in any other related thereto; they may trade for their own account or for third-party account in those securities, provide consulting or other services to the issuer of the aforementioned securities or instruments or to companies related thereto or to their shareholders, executives or employees, or may have interests or perform transactions in those securities or instruments or related investments before or after the publication of this report, to the extent permitted by the applicable law. BBVA or any of its affiliates´ salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to its clients that reflect opinions that are contrary to the opinions expressed herein. Furthermore, BBVA or any of its affiliates’ proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. No part of this document may be (i) copied, photocopied or duplicated by any other form or means (ii) redistributed or (iii) quoted, without the prior written consent of BBVA. No part of this report may be copied, conveyed, distributed or furnished to any person or entity in any country (or persons or entities in the same) in which its distribution is prohibited by law. Failure to comply with these restrictions may breach the laws of the relevant jurisdiction. In the United Kingdom, this document is directed only at persons who (i) have professional experience in matters relating to investments falling within article 19(5) of the financial services and markets act 2000 (financial promotion) order 2005 (as amended, the “financial promotion order”), (ii) are persons falling within article 49(2) (a) to (d) (“high net worth companies, unincorporated associations, etc.”) Of the financial promotion order, or (iii) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the financial services and markets act 2000) may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”). This document is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is available only to relevant persons and will be engaged in only with relevant persons. The remuneration system concerning the analyst/s author/s of this report is based on multiple criteria, including the revenues obtained by BBVA and, indirectly, the results of BBVA Group in the fiscal year, which, in turn, include the results generated by the investment banking business; nevertheless, they do not receive any remuneration based on revenues from any specific transaction in investment banking. BBVA is not a member of the FINRA and is not subject to the rules of disclosure affecting such members. “BBVA is subject to the BBVA Group Code of Conduct for Security Market Operations which, among other regulations, includes rules to prevent and avoid conflicts of interests with the ratings given, including information barriers. The BBVA Group Code of Conduct for Security Market Operations is available for reference at the following web site: www.bbva.com / Corporate Governance”. BBVA is a bank supervised by the Bank of Spain and by Spain’s Stock Exchange Commission (CNMV), registered with the Bank of Spain with number 0182.

×