The first quarter of 2013 is gone and Colombia economic activity started with slow speed: for instance high unemployment rate (11.8% in february of 2013), and low consumer expectation through lower expending in 2013 according to broadcast information. Nevertheless, there are indicators that can pull up Colombia economy in 2013, for instance the coffee short and long run programs to improve productivity and the crude oil production, although the last one brings an unfair economic growth, it makes its poor work. Government has to use her spending efficiently to avoid the beginning of Colombia meltdown, the GDP growth rate is forecasted by local and foreign agencies and the average is a 4.0% in 2013 but this average was 4.6% in 2012 and the real figure was 4.0%, then I decided to make my own forecast and the result was a GDP growth rate of 2.5% in 2013 if government does not do anything to reduce unemployment rate and to improve coffee productivity and industrial sector competitiveness. However, under efficiently spending, my best scenario is a GDP growth rate of 3.5% in 2013.
Author: Humberto Bernal,
Economist,
e-mail: zhumber@gmail.com
Twitter: @Humberto_Bernal
The first quarter of 2013 is gone, local and foreign agencies made their forecast about local economic growth and they are conservative, the average Gross Domestic Product (GDP) growth rate is 4.0% in 2013. I used to take the average of these forecast to make my GDP growth rate forecast but last time theses forecasts were far from the reality, for instance it was expected that Colombia had been growing at 4.6% in 2012 but the real economic growth rate was 4.0% in 2012. Therefore, I decided to make my own forecast and compared with other agencies. The econometric model used was a time series model called VEC where I take into account previous values of GDP in Colombia and USA, Colombian crude oil and coffee production, the local Stock Exchange Index called IGBC and local unemployment rate. Figure 1 shows the observed and forecasted values, one can see that they are well fitted values (the blue line is the observed data and the red line is the forecasted). It is important to highlight that the model takes into account all information from time series, it means trend, cycles and seasonality.
Figure 1. Colombia GDP and its forecast 1977-2013
(quarterly data, Col$billion at 2005 prices)
From this model, the conclusions after many statistical positive tests are: Colombia GDP growth forecast is 2.5% at the end of 2013 if crude oil production increased in 9.0% in 2013, coffee production shows a decline of 24.9%, the local Stock Exchange shows an increase of 7.5%, unemployment rate is 12.7% at the end of 2013 and USA GDP growth rate is 1.1% in 2013. This values can change, of course, through government proper investment in coffee sector (through long and short run productive programs), better young job opportunities for reducing unemployment rate and exogenous better growth rate from the United States. Table 1 shows both scenarios, the forecasted scenario I (without proper government intervention), this scenario shows the variables values and the growth rates. The scenario II shows the variables growth rates just, under this last scenario (proper government intervention) Colombia GDP forecast is 3.5% at the end of 2013. Therefore if Colombia wants to reach a 3.5% GDP growth rate, she has to invest in order to reduce unemployment, pays attention to coffee and industrial sector through short and long run productive programs. The bonus that Colombia can get is an economic growth rate of 2.0% of the United States in 2013.
Table 1. Colombia economic variables Forecasts at the end of 2013
(under quarterly data since 1977, VEC time sires model)
Variable
|
Value end of 2013
(scenario I)
|
Growth I
(scenario I)
|
Growth II
(scenario II)
|
Crude Oil
(Average barrels per day)
|
1,012,173
|
9.0%
|
9.0%
|
Coffee
(Annual sacks of 60kg)
|
5,617,496
|
-24.9%
|
0%
|
IGBC
(Index)
|
12,133
|
7.5%
|
7.5%
|
Unemployment
(Rate %)
|
12.7%
|
10.0%
|
|
GDP USA
(US$billion of 2000)
|
55,485
|
1.1%
|
2.0%
|
GDP Colombia 2013
(Col$billion of 2005)
|
484,468
|
2.5%
|
3.5%
|
Source: Bureau of Statistics (DANE and DNP). Own calculations. Stata 12.1.
Forecasted GDP growth rate by local and foreign agencies
As usual, I did the summary of GDP growth rates from main agencies around the World and local ones, in this case I added my forecast. Figure 2 and Table 2 shows the results. The highest forecast is done by DNP (local government agency) with a GDP growth rate of 4.8% in 2013, although they are working with information from june of 2012 (they have to update her forecast), then there are a group of foreign and local agencies that forecast between 4.0% and 4.4% most of them are foreigners and finally the lowest forecast were done by World Bank and me with 3.8% and 2.5% respectively. The main result from this forecast is Colombia will face a similar forecast compared to 2012, the average is a GDP growth rate of 4.0% in 2013 but this forecast shows high probability to be lower due to recent information concerned with decreasing economic growth rate in local industrial sector, although coffee production and crude oil production showed a high production at the beginning of 2013. Finally the region GDP growth rate forecasted is about 3.7% in 2013 and the World GDP growth rate forecasted is 2.9% in 2013.
Figure 2. Colombia GDP growth rate forecasts for 2013
(Foreign and local agencies)
Table 2. GDP growth rate forecast for 2013
(Foreign and local agencies, %)
Agency
|
World
|
Latin America
|
Colombia
|
Data of publication
|
DNP
|
4.8
|
June 2012
|
||
IMF
|
3.5
|
3.6
|
4.4
|
October 2012 - January 2013
|
Euromonitor
|
3.5
|
4.0
|
4.3
|
January 2013
|
The Economist
|
2.2
|
3.6
|
4.3
|
April 2013
|
ANIF
|
4.0
|
April 1013
|
||
Colombia Central Bank
|
4.0
|
March 2013
|
||
Fedesarrollo
|
3.8 - 4.0
|
January 2013
|
||
World Bank
|
2.4
|
3.5
|
3.8
|
January 2013
|
Humberto’s
|
2.5
|
April 2013
|
||
Average
|
2.9
|
3.7
|
4.0
|
Sample
|
Standard Deviation
|
0.7
|
0.2
|
0.6
|
Sample
|
Source: Collecting from agency.
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