Fitch Ratings maintains Colombia’s rating at BB+ with stable outlook

(MENAFN) On Wednesday, Fitch Ratings announced that it has maintained Colombia's long-term foreign currency issuer default rating at BB+ with a stable outlook. The agency’s decision reflects Colombia's consistent track record of macroeconomic and financial stability. Despite this positive assessment, Fitch highlighted several constraints on the ratings, including the country's high fiscal deficits, substantial interest burden, and significant reliance on commodity exports.

Fitch anticipates that Colombia’s central government fiscal deficit will expand to 5.6 percent of GDP this year, up from 4.3 percent in the previous year. Although the fiscal deficit is expected to narrow slightly to 5.2 percent of GDP in the near term, improvements in revenue from an economic recovery and relatively stable nominal spending are anticipated. The agency also projects that consolidated general government debt will rise to 57.7 percent of GDP by 2026, an increase from 53.7 percent in 2023.

The outlook for Colombia’s economic growth shows a modest recovery, with GDP expected to grow by 1.5 percent this year. Growth is projected to accelerate to 2.8 percent in the following year and reach 3 percent by 2026, driven by less restrictive monetary policies that are anticipated to boost consumption and investment. The statement indicates that higher consumption and investment will be supported by a reduction in the central bank’s interest rates.

Despite these positive projections, Fitch noted that domestic demand remains weak due to persistently high real interest rates, even with the beginning of a monetary easing cycle by the central bank. This ongoing tight monetary policy continues to exert pressure on domestic economic activity, highlighting a challenging environment for growth despite favorable conditions expected in the future.

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