Fitch, Standard & Poors, Moody’s All ‘Negative’ on Colombia Debt
New York-based global financial-ratings agencies Fitch, Standard & Poors (S&P) and Moody’s are now unanimous: Colombia’s debt rating has been downgraded to “negative.”
On March 6, Fitch officially changed Colombia’s “Long-Term Foreign-Currency Issuer Default Rating” (IDR) outlook to “negative,” following earlier, matching downgrades from S&P and Moody’s.
Fitch cited “deterioration in [Colombia’s] fiscal position and uncertain prospects for corrective measures. The central government fiscal balance for 2024 came in at 6.7% of GDP, sharply underperforming Fitch’s forecast of 5.6% of GDP, mainly due to revenue shortfalls and an inability to implement offsetting spending cuts.
“As a result, general government debt-to-GDP jumped to an estimated 58% from 53% in 2023. Fitch believes that fiscal risks are tilted to the downside as the government will continue to struggle to meet fiscal targets and debt-to-GDP will continue to rise over the forecast period.”
On a similar note, Morningstar DBRS recently rated Colombia debt as unfavorably “low.”
Even so, “Colombia’s macroeconomic picture is not all bad,” DBRS senior VP Michael Heydt stated earlier this year.
“Rising inflation expectations are anchored within the central bank’s target range, the current account deficit has narrowed to a more sustainable level, and the economic recovery is expected to accelerate this year.
“However, the fiscal situation has clearly deteriorated. The key question for Colombia’s credit profile going forward is how President Gustavo Petro will balance the pursuit of his progressive agenda with the need to retain investor confidence,” Heydt added.
According to Fitch, “mounting spending pressures and budgetary rigidities will make further deficit reduction difficult to achieve beyond 2026 without implementing tax reforms. Colombia has a good track record of implementing revenue-enhancing tax reforms amid fiscal pressures, but Fitch does not anticipate additional tax reforms during the rest of the Petro administration. Presidential elections are scheduled for May 2026.”
On the other hand, “Fitch expects economic growth to accelerate significantly in 2025 to 2.7% from 1.7% in 2024 on the back of resilient consumer spending and recovering investment.
“However, uncertainties about trend growth persist since investment to GDP fell significantly during the pandemic and has only recovered to 17.1% in 2024. Fitch believes the ratio will remain below historic levels (averaging 22% of GDP from 2010 to 2020) throughout the forecast period.”
