Bolivia Economic Outlook
GDP growth was 3.5% last year, equaling the average of the prior 10 years. Recent data shows GDP growth weakened to 2.3% in Q1 of this year due to slowing private and government spending and a slump in exports. The slowdown was expected given earlier high-frequency data. Looking ahead, high-frequency data suggests that the economy likely remained weak in Q2. In Q2, cement output fell slightly year on year (Q1: +3.2% yoy), and natural gas production dropped 14% (Q1: -10% yoy). Cement output is a proxy for the construction industry, and its drop potentially indicates that higher input costs and interest rates this year have discouraged building work. Meanwhile, the fall in natural gas production largely reflects a recent lack of government funding for exploration wells. In other news, in August, the government said it hoped for upgrades to its credit ratings after paying the last installment of a USD 500 million loan.
Inflation was stable at 2.7% in July. The currency peg and government subsidies have contained inflation in recent years. Our panelists see Bolivia maintaining one of the region’s lowest inflation rates this year and next. Key factors to watch include changes to the currency peg, government subsidies, export controls and the El Niño weather pattern.