Steady as she goes: Growth and greater stability point to a prosperous future

As economic miracles go, Colombia has some impressive supporting statistics but is still very much a work in progress. To go from being practically a pariah state to one of banking giant HSBC’s six most exciting emerging markets in a little over one generation almost defies belief. Yet international bodies such as the World Bank endorse that sentiment. Its “Doing Business 2013” report ranked Colombia sixth out of 185 countries for investor protection. The same report gave it 154th place for enforcing contracts, although Colombia’s overall place in the tables has soared 30 spots since 2008 to 45th.

SECURITY: The good news stems from consistent macroeconomic growth over the past 10 years and recent improvements in security. After decades of fighting domestic insurgency, drug-fuelled crime and high levels of poverty, it seems Colombia has turned a corner. Security has been a central aspect of renewed investor interest in the country. A strong, sustained effort to eradicate armed groups, such as the Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de Colombia, FARC) and the National Liberation Army (Ejército de Liberación Nacional, ELN), has vastly reduced their capabilities. It has also encouraged peace talks that look to have a greater chance of success. These groups once controlled around half of the national territory. Today little remains outside of the reach of the combined military and police forces.

Confidence is high as investor interest soars in Latin America’s third-largest country by population. This is also partly due to a relatively laissez faire approach to economic policy, which contrasts with less liberal regimes in the region, such as Argentina. HSBC gave Colombia exalted status when it announced it would create a fund to invest in it, along with Indonesia, Vietnam, Egypt, Turkey and South Africa (together known as CIVETS). Now considered an upper-middle-income economy by the World Bank, Colombia is the world’s 28th-largest economy. According to IMF figures, its GDP reached COP700.04trn ($420.02bn) at current prices in 2013.

Colombia is also applying for membership of the Organisation for Economic Cooperation and Development (OECD). The OECD is already reviewing its public policies – which it will do continuously over the next two to three years – having recently accepted the country’s application for membership.

TIMES GONE BY: Apart from earlier civil wars, the 1980s and early 1990s represented the most turbulent period of violence over the past century. After forming in the late 1960s, the two predominant armed groups, the ELN and the FARC, were operating near the peak of their power and controlled vast swathes of rural territory. Meanwhile, the rapidly growing drug trade fuelled the violence in major urban centres such as Medellín and Cali. Despite increased violence and a combination of high unemployment and inflation during the latter half of the decade, GDP growth throughout the 1980s averaged 3.41%, according to World Bank data.

Although some actions, such as the approval of an extradition agreement between Colombia and the US in 1987, contributed to the gradual decline of the drug cartels, the first half of the 1990s saw a continuation of violence, with high-profile assassinations, kidnappings and terrorist attacks.

NEW CONSTITUTION: In 1991 the Constitution, which had been in place since 1886, was replaced.

Several significant articles regarding the country’s political structure were included, such as decentralisation, the continuation of banning consecutiveterm presidencies (which would later be amended), the creation of a constitutional court and the controversial banning of the extradition of nationals, which would also later be overturned.

Again, despite the political and social issues and the violence that resulted from them, macroeconomic growth figures continued to move forward, as annual GDP growth averaged 2.86% throughout the 1990s, according to the World Bank. In 1998 the election of President Andrés Pastrana, the son of a former president, marked the beginning of strong counterinsurgency and organised crime policy.

Pastrana’s “Plan Colombia”, as his initiative became known, was a broad strategy that included military aid and support from the US, but it ultimately failed. However, US aid continued to increase throughout the 2000s, though it was concentrated towards improving military capacities with very limited scope for tackling the root problem – social inequality.

When Álvaro Uribe emerged as president in 2002, strict government anti-narcotic and anti-insurgent policies led to a wide-reaching offensive. By the end of his second term in 2010, terrorism and organised crime were at their weakest point in nearly half a century. In 2005 Uribe also oversaw a constitutional reform to permit consecutive presidential terms.

While Uribe’s administration is most known for its hard-line stance against terrorism and crime, it also notably increased social spending, privatised several state-owned enterprises and implemented an austere policy regarding public accountancy. Moreover, according to World Bank figures, during the first decade of the new millennium GDP growth averaged 4.13%, its highest average in three decades. Colombia’s strongest five-year period of growth occurred during this time, and had it not been for external factors brought on by the 2008-09 global economic crisis, the run of form could have continued. From 2003-07 GDP expansion averaged 5.5% before decelerating to 3.5% and 1.9% in 2008 and 2009, respectively. Nonetheless, the economy quickly rebounded, posting growth of 4% and 5.9% in 2010 and 2011, while the National Statistics Agency (Departamento Administrativo Nacional de Estadistica, DANE) reported an expansion of 4% in 2012.

POLICY APPROACH: An IMF survey published in February 2013 identified “prudent economic policy management and a strong policy framework” as the basis for the recent strong macroeconomic growth. Fiscal consolidation policy in particular, which seeks to reduce the structural deficit to 1% of GDP by 2022, was lauded. Recent administrations have taken a counter-cyclical approach to economic management, allowing private consumption, credit and investment to play leading roles during prosperous times, and applying an expansionary fiscal policy to stimulate economic recovery in times of hardship. Indeed, the implementation of the new fiscal law in 2013, which constitutionally mandates fiscal sustainability, is designed after counter-cyclical policy.

The IMF is not alone in its support of administrative policy. Colombia’s 45th placing in the World Bank’s “Doing Business 2013” report, which broadly ranks state regulation of private sector activities, is well above the regional average of 97. It is also well in front of scores given to less liberal regimes in Argentina (124), Brazil (130) and Ecuador (139).

NDP: The National Development Plan (NDP) 2010-14 outlines the current administration’s development strategy in broad terms. It identifies five engines for growth and development: mining, innovation, housing, infrastructure and agribusiness.

The mining and energy sectors combined could represent a quarter of GDP by 2014, and are expected to create more than 100,000 jobs between 2012 and 2014 (see Mining chapter). Innovation, currently a competitive disadvantage for the country, has been receiving 10% of the extractive industries’ royalties since 2012. Innovation advances could increase non-extractive value-added exports by 31% from $14.3bn in 2010 to $21bn in 2014. Incentives for stimulating innovation include a 175% income tax deduction on investments in scientific and technological development, and a sales tax exemption on equipment imported for research and development purposes (see Research and Innovation chapter).

Upgrading the infrastructure network has also been prioritised, with planned investment levels of 3-4% of GDP for the foreseeable future (see Transport chapter), while the construction of social housing for 1m families is on the administration’s social agenda (see Real Estate and Construction chapter). Finally, plans to improve an ailing agribusiness sector revolve around a goal of seeding an extra 600,000 ha of land by 2014 (see Agriculture chapter).

BUDGET: The 2013 national budget saw a 12% yearon-year rise to COP185.5trn ($111bn), with spending increasing in several areas. Servicing of the national debt is responsible for a major portion of the overall rise in expenditure. Funds devoted to debt financing increased by 21% from COP38.7trn ($23.2bn) in 2012 to COP46.97trn ($28.2bn), equivalent to 6.5% of GDP. Public sector investment also rose, with health spending up 10.7% from COP36.8trn ($22.1bn) to COP40.8trn ($24.5bn), equal to 5.7% of GDP. In total, the 2013 national budget amounts to just over a quarter of GDP at 25.7%. The federal government’s 2013 fiscal deficit, originally forecast by the Ministry of Finance and Public Credit ( Ministerio de Hacienda y Crédito Público, MHCP) to equal 2.2% of GDP, was revised in December 2012 to 2.4% as a result of weaker-than-expected oil prices and potentially weak economic production. In broader terms, the administration has funnelled public investment into social sectors and industries it has identified as key economic drivers.

INCREASED SPENDING: From 2010 to 2013 public investment in mining increased by 86%, and investment in agriculture and fisheries rose by 58%. Social spending also saw large hikes, with expenditure on health up 81%, social housing up 71% and education up 29%. Transport has received an increase of 51% in funds over the past three years as the government strives to close the infrastructure gap. The government’s 2013 investment portfolio devoted 77% of finances to social and economic drivers, with COP17.5trn ($10.5bn) dedicated to social investment and COP13.9tn ($8.3bn) to economic growth.

MONETARY POLICY: The Central Bank of Colombia (Banco de la República de Colombia, BRC) is responsible for implementing monetary policy on inflation, financial stability and market liquidity, though its primary aim is to achieve price stability. Monetary policy in recent years was regarded as “broadly neutral” according to the IMF’s 2013 Article IV Consultation. Inflation has been largely kept under control by the BRC in recent years, with targeted rates falling from 4.5-5.5% in 2009 to between 2% and 4% by 2012, with the long-term goal set at 3%. Inflation was reported as 2.16% in June 2013. Meanwhile, the benchmark interest rate, which is set each quarter by the BRC, was lowered by 50 basis points to 3.25% in March 2013 – the fourth straight month it cut rates – where it remained at time of press.

BRC ROLE: The BRC has been aided in controlling inflation by a rapidly appreciating Colombian peso, though this has caused problems by increasing the price of exports and encouraging higher – and cheaper – imports. The BRC is active in intervening in the foreign exchange market to control exchange rate volatility, and as a rule holds “volatility” auctions whenever the exchange rate is 4% above or below its 20-day average. It also may intervene through the acquisition/accumulation of international reserves, and has done so on several occasions. As of December 2012 net international reserves were reported at $37.5bn, up $5.2bn (16%) on the previous year.

The peso, which has seen its average annual value increase by 16% over the past four years from COP2156.29:$1 in 2009 to COP1798.23:$1 in 2012, is currently harming export revenues. The “equilibrium” rate has been identified by the MHCP as being COP1950:$1. In 2013 the BRC has been active on the international market as the government announced in February that it would be purchasing $1bn to pay down interest and principal on foreign bonds and weaken the currency. As of mid-August, the exchange rate was around COP1880:$1.

EXTERNAL MARKET: Growth in the extractive industries has been the key driver of rising exports, led by the production of crude oil and its derivatives, which accounted for 73.8% of total exports through the first 10 months of 2012. Colombia is one of the fastest-growing oil producers in the region, surpassing 1m barrels per day for the first time on December 31, 2012, and expanding total export revenues by 5.8% in 2012, according to Ministry of Commerce, Industry and Tourism data. Even so, the country’s current account has been posting an expanding deficit, growing from 1.3% ($1.89bn) of GDP in 2005 to 3.3% ($11.9bn) in 2012. Total exports exceeded $60bn for the first time in 2012, up 5.8% over 2011’s total, though this represented a significant slowdown after exports expanded 43.3% the previous year. Imports also rose by 7.2%, reaching $58.6bn in 2012.

However, increased trade figures are not only a sign of growth from the extractive industries, as several other factors have been critical to the development of external trade. Liberal regulation and the creation of free trade zones (FTZs) have provided companies with numerous tax incentives on both exports and imports, thus encouraging trade (see analysis), while a recent slate of free trade agreements (FTAs) negotiated by the government has done the same.

CREDIT RATINGS: The prudent macroeconomic and fiscal policies and steady growth identified by the IMF prompted three major credit ratings agencies to grant investment-grade status in 2011 for the first time in more than a decade. In the case of Standard & Poor’s (S&P), which rates sovereign debt in 127 nations, Colombia was one of just five nations to be assigned a positive outlook as of March 2013. Furthermore, S&P stated its long-term foreign currency rating of “BBB-”, which was granted in March 2011, could be upgraded in 2013, pending the “effective implementation” of fiscal policy. Fitch Ratings, which has also assigned Colombia a “BBB-”, announced in March 2013 that it has moved the country’s outlook from stable to positive, indicating that it could well receive an upgrade in 2013 given the prospect of Colombia becoming a net sovereign external creditor during the year. Moody’s has maintained its stable outlook on its “Baa3” credit rating.

ATTRACTING INVESTMENT: While ratings and positive outlooks from the major credit ratings agencies affirm strong fiscal policy, increased investment flows verify the economic potential. According to export promotion agency Proexport, as a percentage of GDP, investment flows are the second highest in the region at 26.2%, behind only Peru (27%), and nearly double the 13.7% registered in 2000. This is partly due to a strong institutional framework protecting investors, endorsed by the World Bank, which ranked Colombia sixth in the world and first in Latin America in terms of investor protection. Colombia is also now adhering to the OECD’s Declaration on International Investment and Multinational Enterprises as part of its application for membership.

Proexport figures also show that foreign direct investment (FDI) has been growing strongly since the turn of the millennium. From 2000 to 2005 annual FDI inflows averaged $3.68bn, while from 2006 to 2010 they more than doubled, averaging $8.07bn. In 2011 FDI inflows reached $13.6bn, accounting for 4% of GDP, and in 2012 they totalled $15.6bn, or 4.2% of GDP, following figures from the BRC and the World Bank. Chile led the pack in 2012 in terms of FDI sources, accounting for 10.3% of the total, followed closely by Brazil (9.9%), the US (9.4%) and the Netherlands (8%). By sector, FDI inflows from 2000-11 have been concentrated in oil and mining (31%), followed by industry (24%), energy and utilities (11%), and transport and communications (6%).

AGRICULTURE: Along with slowdowns in construction and industrial manufacturing, agriculture was responsible for restraining GDP growth in 2012, as it expanded at a slower rate than the wider economy. The NDP identifies the sector as one of the five key drivers in the short to medium term. As such, incentives have been created to stimulate investment, such as the 10-year income tax exemption on newly planted crops (due to expire in 2014). Growth of 2.6% in 2012 marked the continuation of a slow expansionary trend after the sector grew by 2.4% in 2011. The sector’s performance is mainly due to a faltering coffee sector. As the country’s primary cash crop, the 7.5% contraction in coffee production in 2011 was followed by a downward movement of 2.2% in 2012, according to DANE. Crop yields in other agricultural products saw a 2.9% rise, while livestock production was up 4.1%, helping counter the effects of decreased coffee output.

Colombia is the world’s fourth-largest producer of coffee, and 2012’s decline in the international price of the commodity hit the sector hard, resulting in the crop’s worst year in decades. Disease and currency appreciation also affected the incomes of the more than 500,000 families that rely on the export crop for their livelihood. As a result, thousands of coffee producers took to the streets in February 2013 to protest the lack of government support. State subsidies enacted in July 2012 paid farmers COP60,000 ($36) per 125 kg of coffee, though this was raised in March 2013 to COP115,000 ($69).

INDUSTRIAL MANUFACTURING: It is difficult to hold a conversation about economic development in Colombia without reference to “Dutch disease”. This is a supposed phenomenon whereby increased natural resource extraction results in currency appreciation and a decline in industrial manufacturing; it can be highlighted as one of several factors affecting the ailing industrial manufacturing sector, though it is not the only nor necessarily the primary one. While currency appreciation has in part been due to rising commodity exports – which as a result damaged the value of general exports – high labour costs, inefficient and expensive infrastructure, and a lack of technological adoption among manufacturers (who instead rely on labour-intensive processes) have contributed to the sector’s stagnation.

Industrial manufacturing is traditionally one of the largest contributors to economic production and, according to DANE, gross revenues from manufacturing from 2001 to 2011 increased at an average annual rate of 11.2%, at which point the sector brought in $115bn. However, after expanding by 1.8% in 2010 and 5% in 2011, in 2012 the sector contracted by 0.7% following a particularly bad fourth quarter that saw industrial manufacturing drop by 3.7%. Manufacturing recorded a negative change of 4.1%. The contraction was primarily caused by a 5.1% decline in the production and refining of oil products, a 2.2% drop in chemicals, a 5.8% decline in plastics and rubber, and a 1.2% fall in the production of non-metallic mineral products. The automotive industry has been one of the brighter areas of the manufacturing sector, posting growth of 61% in auto part exports over the past five years, while several global manufacturers, such as General Motors and Toyota, have set up local assembly plants.

CONSTRUCTION: Given the recent expansion in the construction sector – in 2011 it increased by 10% – its 3.6% growth in 2012 is fairly modest. The industry endured a topsy-turvy year, contracting by 0.5% and 2.3% in the first and third quarters and expanding by 12.2% and 5% in the second and fourth quarters. The sector experienced 16% growth in the first quarter of 2013. The deceleration in 2012 was down to a significant drop in the construction of public works, which after expanding by 17.4% in 2011 dropped sharply, increasing by just 2.2% in 2012, while the total area approved for construction fell by 17.8% from 25.6m sq metres in 2011 to 21.1m sq metres in 2012. Building construction, meanwhile, expanded by 5% in 2012. Despite relatively restrained growth in 2012, the medium- to long-term prospects for the industry remain positive, partially thanks to the government’s $55bn, 10-year infrastructure budget and its focus on the construction of social housing. Likewise, private sector development should continue alongside broad economic growth.

EXTRACTIVE INDUSTRIES: One of the recent drivers of economic growth, the extractive industries once again provided the platform for broader expansion in 2012. Following 14.4% growth in 2011, the combined extractive industries (mining and oil and gas) expanded by 5.9% in 2012 on the back of a 3.9% rise in coal production, a 5.5% increase in hydrocarbons output and a 19% leap in metallic minerals.

A significant milestone for the oil industry was reached in 2012 as Colombia surpassed production of 1m barrels per day, a figure that the administration hopes to maintain throughout 2013. However, current proven reserves are enough to maintain the present rate of production for only around seven years. On the positive side, investment in exploration is rising and efforts to find new reserves have been generally more successful than in previous years. In 2003, only 4.3% of perforated wells resulted in viable discoveries, a figure reported by Proexport as reaching 30% in March 2013. Additionally, exploratory wells are expected to total around 570 by 2014.

The mining sector owes its strong growth to increased revenues in 2012, derived chiefly from the production of nickel (34.3%), iron (30%), and gold (5.2%). The 19% expansion in metallic mineral production represented a dramatic change of pace from the 12% contraction in 2011. Though Colombia is the region’s largest producer of coal, 2012 saw several problems slow growth in the sector.

The production of coal, which expanded by 15% in 2011, decelerated significantly, rising just 3.9% in 2012. This was primarily caused by labour disputes in the third quarter, which resulted in a strike halting exports at Drummond International, the secondlargest coal exporter. Strikes at the largest mine in Cerrejón followed during the first quarter of 2013, hampering the production of coal, along with disruptions in transportation infrastructure brought on by labour disputes and attacks by insurgent groups. This was exacerbated when the National Authority of Environmental Licences ordered Drummond to halt operations for more than three weeks at the beginning of 2013, after one of its ships dumped its cargo of coal to avoid sinking in high seas.

CONNECTIVITY: A lack of connectivity remains one of the main constraints on economic growth in Colombia. Despite the existence of numerous large cities, the establishment of road and rail networks has not kept up with the rapidly growing economy. As such, this area has been prioritised by the current government as part of the $55bn infrastructure budget planned for the next decade.

Several issues have slowed the construction of transport infrastructure. The first problem stems from the country’s rugged topography (a common trait across all Andean countries), which slows planning, increases construction and maintenance expenses, and challenges engineers. As a result, logistics costs are very high and the inter-city movement of goods and labour severely limited. In some cases it is easier to export as opposed to ship domestically, despite added Customs duties.

The World Economic Forum’s “2012-13 Global Competitiveness Report”, which graded 144 countries on several indices, ranked Colombia 108th in quality of overall infrastructure, 126th in quality of roads, 109th in quality of railways and 125th in quality of port infrastructure. Businesspeople surveyed reported that inadequate infrastructure was their third-largest concern for doing business.

PRIORITY: The current administration has placed an emphasis on expanding the national infrastructure network, with the Ministry of Transport announcing the potential for COP44trn ($26.4bn) to be invested in more than 30 infrastructure projects in 2013 and 2014 (see Infrastructure chapter). The National Infrastructure Agency (Agencia Nacional de Infraestructura, ANI), which was created two years ago to oversee the network, will hand out road concessions totalling 550 km, worth COP4trn ($2.4bn).

The head of the ANI, Luis Fernando Andrade, identified several key medium-term objectives in 2012, including: raising infrastructure investment to 3% of GDP by 2014 ($18bn); expanding the national road network by a factor of 2.4 from 2011 to 2014 and a factor of 4.6 from 2014 to 2018; increasing railway and port capacity by a factor of 1.8 from 2011 to 2018; and streamlining regulations related to public-private partnerships and licensing procedures.

LABOUR MARKET: Infrastructure is but one of numerous constraints on economic growth, as the country’s large informal workforce also diminishes productivity. In fact, Colombia is estimated to have the largest informal economy in the region. Though by nature measuring the size of the informal economy is an arduous task, most estimates suggest roughly 50% of the labour force is informal.

The lack of contracted work leads to increased fluidity within the labour market as temporary workers shift from job to job, with damaging effects on productivity. According to the OECD, Colombia’s labour market productivity has progressed slowly in comparison to the Latin America region and the lower half of OECD economies. From 1990 to 2011, labour productivity, as measured by GDP per hour worked, increased from a base of 100 in 1990 to 125.56 in 2011, while Latin America saw productivity over the same period jump from 100 to 141.79 and the lower half of the OECD (measured by GDP per capita in 1990) from 100 to 189.12.

Another issue is the high unemployment rate. One of the administration’s key goals is to bring the index down to single digits by 2014. Unemployment levels have improved slowly but steadily over the past decade, with the average annual percentage falling from 15.6% in 2002 to 10.6% in 2012, according to OECD data. Two of the primary barriers to reducing informality and unemployment, and in turn increasing productivity, are relatively high wages and labour costs. The minimum monthly salary for 2013 is COP589,500 ($354), according to Proexport. There are additional costs due to taxes and social expenses; these can total up to half of a given employee’s salary. The 2012 tax reform was designed in part to stimulate job creation by eliminating payroll taxes.

RISING MIDDLE CLASS: Despite the large informal economy, GDP growth has led to an expanding middle class with increased purchasing power. Combined with a large, young and ambitious population, this bodes well for the future of the domestic market. According to local think tank Fedesarrollo, the middle class, as defined by a monthly household income of $1054-4329, expanded from 16.2% (6.7m) of the population in 2002 to 25.3% (11.6m) in 2012, and by 2025 it is expected to be equal to between 46.3% (24.7m) and 59.9% (32.1m).

However, while these indicators portray growing prosperity, the reality is that impoverished families continue to outnumber the middle class and inequality is stark. According to the World Bank, the country’s Gini coefficient – a measure of the distribution of income, where 0 represents perfect equality and 1 perfect inequality – was 0.559 in 2010, placing it among the least equal countries in Latin America.

POVERTY: Despite significant reductions over the past decade, poverty and inequality remain severe social issues that are hampering economic development and fuelling violent crime and guerrilla activities. Poverty, as measured at the national poverty line, fell from 48% of the total population in 2003 to 34% in 2011, according to the World Bank. Yet even with this improvement Colombia compares unfavourably with some regional neighbours, including Chile (last recorded as 15% in 2009), Brazil (21%), Peru (28%) and Ecuador (29%). In December 2012 Congress passed legislation that overhauled the national tax regime. The reform was designed not only to close loopholes and simplify the system, but also replace the regressive approach with a progressive regime. The outcome could have a big impact on reducing inequality and poverty in what is considered one of the most unequal countries in the world (see analysis and Tax chapter).

DEVELOPMENT: Economic development is diverse as the country counts on a host of fairly developed secondary cities outside of the capital, Bogotá, that offer developed markets capable of supporting a variety of industries. The country’s urbanisation has had a significant impact on the availability and efficiency of establishing social infrastructure such as hospitals and schools, and has also provided a platform from which to further build up value-added industrial manufacturing (see analysis).

SHOCK FACTOR: The economy is susceptible to external shocks (both positive and negative) resulting from fluctuations in international commodity prices, demand for goods and exchange rates. The global financial crisis of 2008-09 and Colombia’s recovery from it are a perfect example of the impact polarity of external factors on economic development. While growth slowed to a crawl in 2009, with GDP expanding 1.9% on the back of reduced demand from its two largest trading partners, the US and Europe, its recovery was in part due to surging commodity prices stimulating growth in the mining sector and dragging the economy along with it. The effects of increasingly international economic ties have also resulted in the recent currency appreciation, which has had an adverse impact on exports.

OUTLOOK: While obstacles to long-term sustainable development, such as increasing susceptibility to external shocks, are numerous, so too are the competitive advantages: access to both the Atlantic and Pacific Oceans, the third-largest population in Latin America with over 55% under the age of 30, seven metropolitan cities with more than 1m people each, a wealth of natural resources and a comparatively high quality of labour. However, it has been only recently, amid an improving security environment, that investor interest has begun to increase.

Yet the recognition from global financial institutions and ratings agencies, the increased investment flows and recent macroeconomic expansion will all be for nought if organised crime and insurgency are allowed to reclaim significant influence.

While certainly not outside of the realm of possibility, this seems relatively unlikely given the recent strengthening of military and police forces, as well as encouraging signs from the continuing peace talks with FARC that are being held in Cuba.

As a result, the government should be more or less free to continue its focus on issues once neglected yet crucial to long-term development – such as reducing inequality and poverty, expanding infrastructure networks, improving labour productivity and establishing value-added downstream processes.

Meanwhile, the continuation of strong fiscal and monetary policy should help contain the effects of currency appreciation on other external sectors.

Steady macroeconomic expansion is forecast for the near future, with the IMF anticipating GDP growth to expand at a rate of around 4.1% in 2013, in line with the country’s average of 4.5% from 2002 to 2012. Optimism has indeed emerged once again.