Although the introduction of IVA (VAT) and tepid economic activity weighed on consumerconfidence in early 2017, we maintain a positive outlook for the Colombian consumer over the remainder ofthe year and into 2018. Cooling inflation, due to lower food prices and more favourable exchange ratedynamics as oil prices recover, will boost the disposable incomes of consumers.
Despite low commodity prices and an economic slowdown across Latin America, Colombian consumershave proven to be relatively resilient with private consumption growth significantly outpacing the regionalaverage over recent years. We expect this to continue in 2017, as private consumption is forecast to expand3.3% y-o-y compared to 1.6% growth y-o-y for Latin America as a whole. Moreover, this marks aconsiderable acceleration from the 2.1% growth in private consumption recorded in Colombia in 2016. Thisis on the back of lower inflation and stronger wage growth following increasing economic activity. OurCountry Risk team forecast real GDP growth to register 2.3% in 2017 - up from 2.0% in 2016.