Colombia Retail Report Q3 2015
BMI View: With the fourth largest economy in Latin America, measured by GDP, Colombia's retail sectorpresents many opportunities for international and domestic retailers, as well as investors. Years ofeconomically sound policy have lowered barriers to entry for international firms, and sustained economicgrowth has brought lower unemployment rates and higher levels of affluence for a significant portion of thepopulation. However, lingering poverty levels, a deficient physical and transportation infrastructure, andthe slow rate of non-cash payment integration into the economy continue to remain a hindrance toachieving full economic growth potential. Nevertheless, significant opportunities remain. In particular, thecontinuing fall of the informal sector's market share and the continuing rise of e-commerce and onlineretail should provide meaningful incentive for further investment and expansion.
Overall, the economy looks set to expand, with year-on-year (y-o-y) real GDP growth forecast at 3.1% and3.5% in 2015 and 2016 respectively. However, due to recent currency fluctuations, BMI projects that totalhousehold income and total household spending, in USD terms, as well as household spending across allsub-sectors of the retail market we monitor, will see a significant contraction y-o-y in 2015. Nevertheless,this is expected be a short-term trend, as we predict a return to positive growth of household income andspending in 2016. Furthermore, we expect that in 2016, the number of households in the middle classbracket will increase by over 7%. Among other things, this should provide increased (as a % of totalspending) non-essentials spending, on sectors such as recreation & culture, which is expected to see thehighest growth rates over our forecast period, and decreased (as a % of total spending) spending onessential sectors, such as food & non-alcoholic drinks, which is expected to see the lowest growth ratesover our forecast period.
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