COLOMBIAN DURABLE GOODS CONSUMPTION TO RISE.

Following two years of depressed economic activity and weak private sector consumption, it is likely that private sector purchases (both household and industrial) will increase modestly in Colombia during 2002. A mild recovery in household expenditures was noted as of the second quarter of 2001, although sustained gains are not likely until Colombia's trade panorama improves in the second half of 2002.

According to data recently released by Colombia's central bank, consumption of durable and semi-durable goods was higher than non-durable goods through most of 2001. This trend is likely to continue through 2002, with a moderate increase in consumption of non-durable goods in the third and fourth quarters.

OBSTACLES TO CONSUMPTION PERSIST One factor that has consistently worked against private sector spending in recent years is a lack of consumer confidence. Not only are consumers concerned about the unfavorable economic climate, but they are also worried about urban and rural violence. Well-heeled consumers are afraid to wander in public shopping areas and this eats into high-end retail consumption.

Another factor that has undermined confidence is stubbornly high unemployment that reached roughly 18 percent at the close of 2001. Open unemployment is likely to decline a bit in the latter half of 2002, but burgeoning underemployment will persist.

The annualized inflation rate stood at about 8 percent during 2001 and, barring a major devaluation, it should decline a bit further during 2002. Colombia's central bank projects that inflation will drop into the range of 6 percent by the end of the year. Declining prices should contribute to a modest increase in household expenditures as the year progresses. Optimism related to a recovery in retail sales was driven by the recent increase in sales of durable and semi-durable goods.

A recent central bank report stated, "Of the three most important components of total demand (consumption, investment, and exports), consumption was the one that showed the lowest rate of growth during the first six months of 2001. To a great degree, that explained the slow rate of economic expansion that the country experienced over the past 18 months. According to the National Department of Statistics, year-on-year growth in consumption during the second quarter reached 1.5 percent, a rate slightly greater than that observed in previous quarters."

Government economists believe that growth in consumption was driven by a combined increase in public and private sector consumption. During the first half of 2002, gains in public spending outstripped those in household expenditures. However, by midyear gains in household consumption were greater than those in government spending. It appears that household spending will increase further as 2002 progresses.

The central bank report explains, "With regards to household consumption, slow growth was mainly attributed to very weak consumption of non-durable goods over the past year and a half. Sales of non-durable goods declined to very low levels relative to total consumption beginning in June 2000. However, this behavior contrasts strongly with household consumption of durable and semi-durable goods, and even consumption of services, where the level of growth was consistently above average throughout the period."

THE STRUGGLE TO CREATE ENOUGH JOBS One of the biggest challenges faced by Colombia over the next few decades will be to create enough jobs to keep up with expansion of the labor force. With nearly a third of the population under the age of 15, the demand for jobs will increase sharply through 2025.

Colombia's total population surpassed 43 million people during 2001. That amounted to over 12 percent of South America's total population of 350 million people that year. According to Population Reference Bureau (PRB) statistics, Colombia's population will reach 59.7 million people in 2025, which is a 38.5 percent increase over the level in 2001. Also, according to the PRB, Colombia will have a population of 71.5 million people in 2050, which is 65.9 percent higher than the 2001 level. Currently 71 percent of Colombia's total population lives in urban areas.

The CIA's World Factbook indicates that during 2001 Colombians between the ages of birth and 14 years accounted for 31.9 percent of the total population. On the other hand, 63.4 percent of Colombians were 15-64 years old and 4.7 percent were 65 years of age and over.

According to the CIA, Colombia's population growth rate is 1.6 percent and the net migration rate is -0.33 migrants per 1000 people. The United Nations Population Division projects that in the year 2050 about 58.2 percent of Colombia's population will be 15-59 years old, and a relatively high 21.5 percent will be 60 years of age or over.