Fitch Ratings has reaffirmed Colombia’s long-term foreign currency debt rating at ‘BB+’, with a stable outlook. This announcement, made on December 7, 2023, reflects the strength of Colombia’s credit fundamentals, characterized by a history of macroeconomic and financial stability. Despite ongoing fiscal challenges and dependence on commodities, Colombia maintains an environment conducive to investment.
The rating also takes into account the uncertain path of reforms proposed by President Gustavo Petro. Despite a decline in his popularity and political challenges, health and pension reforms continue to advance in Congress. These reforms include changes in contributions to the public pension system and improvements in the efficiency of the health system, especially in rural areas.
The Colombian economy, although facing a slowdown with projected growth of only 1.1% in 2023, shows signs of recovery towards the second half of 2024. Inflation, although high, is expected to gradually decrease, allowing for possible interest rate cuts by the end of 2023.
In fiscal terms, a central government deficit of 4.3% of GDP is estimated for 2023, an improvement compared to 5.3% in 2022. However, an increase in the deficit is projected for 2024. The general government debt is expected to decrease in 2023 to 52% of GDP, aligning with the ‘BB’ category median.
The current account shows a significant improvement in 2023, and foreign direct investment is expected to remain resilient. Despite political uncertainties, Colombia has demonstrated a notable ability to attract investments.
This analysis by Fitch reflects that, despite the media war and rumors of a possible economic debacle under a left-leaning government, investor confidence in Colombia remains firm. The ‘BB+’ rating with a stable outlook is a testament to the country’s economic resilience and dispels unfounded fears of a communist economic collapse. Macroeconomic stability and the continuity of key reforms are fundamental to maintaining and strengthening this confidence in the future.
