Colombia Retail Report Q4 2012

The Colombia Retail Report examines the long-term potential of the local consumer market, but flags short-term concerns about the impact on Colombia's economic outlook of monetary policy and bankingsector regulation.

The report examines how best to maximise returns in the Colombian retail market while minimising investment risk, and also explores the impact of a potential hard landing in China or a continued deterioration in the eurozone on the Colombian consumer and on the ability of producers and exporters to realise returns in the short term.

The report also analyses the growth and risk management strategies being employed by the leading players in the Colombian retail sector, as they seek to maximise the growth opportunities offered by the local market.

Colombian per capita consumer spending is forecast to increase by an impressive 38% to 2016, compared with a regional growth average of 17%. The country comes fourth out of seven in BMI's Latin American Retail Risk/Reward Ratings, although it underperforms slightly for Reward. Among all retail categories, mass grocery retail (MGR) will be the outperformer through to 2016 in growth terms, with sales expected to grow from US$14.80bn in 2012 to US$23.49bn by the end of the forecast period. This increase of 58.7%, is higher than the forecast 56.0% rate of growth for overall food sales.

In the competitive arena, BMI sees upside potential in Colombia's status as the third most populous country and fifth largest economy in Latin America. In addition, approximately three-quarters of Colombians live in urban areas and almost two-thirds of the population are younger than 30; facts that aid the development potential of the country's MGR sector, considering its emphasis on convenience shopping for urban dwellers.

Over the last quarter, BMI has revised the following forecasts/views: ? BMI is maintaining its below-consensus forecast of 4.7% real GDP growth in 2012 and of 4.4% in 2013. This is informed by a slight slowdown in private consumption, although we believe that a positive investment outlook for the mining, petroleum and infrastructure sectors will ensure Colombia enjoys 4%-plus growth rates over the coming years.

Colombia Retail Report Q4 2012 © Business Monitor International Ltd Page 6 ? BMI forecasts that private consumption will contribute 2.4 percentage points (pp) to real GDP growth in 2012, down from 4.7pp in 2011 due to a slowdown in credit growth. Consumer credit growth peaked last year at 28.5% year-on-year (y-o-y) growth, and it has been slowly declining since, reaching 28.1% in March. This again informs our view that private consumption will begin to moderate this year.

? While it may take time for this to affect consumer spending patterns, the retail sector has already felt the impact of a moderating consumer story, with Q112 retail sales growing by 6.1% y-o-y, a deceleration from the 13.2% growth rate achieved in Q111. BMI believes this trend will continue over the coming quarters.

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