2014 Bolivian economic forecasts

Alberto Bonadona writes in Pagina Siete:

Forecasts for 2014

Alberto BonadonaAny prognosis that is made in the economy always will be an approach very close or very far away from what will actually happen. This obvious depends on another: of how reality actually unfold.

However, economists (especially the “pundits”) love to make speculations about the near, medium or long-term future. That they hit in their forecasts, of course, is another matter.

Taking into account what was said, I turn to make some predictions for this year:

The first is to reaffirm what they now say the Government and the international agencies concerning the growth of the Bolivian economy: will continue to grow at a good pace, approaching an increase of GDP, by the order of 5.5%.

Other data which is not easy to match is the unemployment rate. The Government says that it will not be higher than the 3.2%; CEDLA, with its own methodology, estimated to reach three or four percentage points higher than the Government figure.

I say that unemployment figures will continue to show looking good, because this economy offers employment, even to children. Of course, this is not for the wealth generated, but by poverty that mercilessly reproduces.

Of course, exports continue to increase, because all indications are that the prices of ores which Bolivia exports will follow with a high demand.

In the same way, oil prices will remain on a sound footing, because Arab countries are still in upheaval, that does not tend to appease it.

As the gas prices we sell to neighbouring countries are tied to the oil, this is a year that will keep the Bolivian bonanza.

Opinionated Minister Luis Arce will continue saying that the engine of the national economy is domestic demand, because it sees that economic activity within the country presents a series of manifestations of growth, but, as well as external agencies, such as the IMF, he only sees the effect and not the cause.

I will continue to insist that the cause of the growth of GDP in Bolivia are the prices of exports and these have a multiplier effect on domestic demand which, no doubt, tends to be one multiple higher than its cause, that Lord Keynes studied theoretically in the thirties of the last century and look what he called: the multiplier effect.

This can come from increased investment, higher consumption, higher level of exports, greater government spending.

Of course all these elements are present in the national economy, interacting and reinforcing each other, but the fundamental factor were exports. Fortunately, the international market will continue to sending its blessings to this territory, not the national market, as neither can be attributed to a Bolivian decision.

For the Government, to have an inflation rate close to 0% for a month, or perhaps two, it is positive, and it certainly is for everyone, but in 2013 we lived under inflationary pressures which did change the 4.35% Government inflation estimate to 6.5%.

I can assure that these inflationary trends will be in 2014, as I am also sure that will be partially controlled through monetary policy, rescued about 10 years ago and reinforced by this Government.

To make these grandiose predictions, there is no need for a crystal ball, only a simple reading of some data. In this way, it can be assured that the industrialization of the country is not yet on track and, therefore, the growth of domestic demand will not receive this support.

Construction will continue the trend that held the previous years and does not seem to fade, and so the bursting of the speculative bubble in this sector, commented on by colleagues, will continue to shine by their absence.

Improvements in equity are more a result of the internal expansion generated by the external expansion, as is the case in South America, which leaves the Bolivian economy with little originality.

Alberto Bonadona Cossío is an economist.


Published by Bolivian Thoughts

Senior managerial experience on sustainable development projects.

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