Fitch Ratings has revised Colombia’s rating outlook from stable to negative due to worsening fiscal balance and uncertainties regarding short-term corrections. The central government’s fiscal deficit reached 6.8% of GDP last year, surpassing forecasts. Investor concerns about President Petro’s ability to manage deficits are compounded by weak revenue and sluggish growth, with a significant budget suspension noted.
Fitch Ratings has downgraded Colombia’s rating outlook from stable to negative, attributing this change to the nation’s deteriorating fiscal balance and uncertainty regarding immediate corrective actions. The agency maintained the credit score at BB, highlighting a central government fiscal deficit of 6.8% of gross domestic product (GDP) reported last year, surpassing Fitch’s initial forecast of 5.6%. The report noted that fiscal risks in Colombia are predominantly negative, signifying challenges the government faces in achieving fiscal targets and an increasing debt-to-GDP ratio.
Finance Minister Diego Guevara indicated that despite the widening budget deficit, Colombia is adhering to its fiscal rules and forecasts a narrowing deficit to 5.1% of GDP this year. However, investor apprehension persists regarding President Gustavo Petro’s capability to control deficits against a backdrop of sluggish economic growth and weak fiscal revenue. The government commenced the year with a budget suspension of 12 trillion pesos, which has been deemed insufficient by the overseeing committee to address the deficit targets.
Colombia’s debt-to-GDP ratio has escalated by 6.2 percentage points to 60% and is anticipated to stabilize at 60.6% in 2025, as per the finance ministry’s projections. Fitch expressed concerns that the revised fiscal rule target for this year may be unattainable, largely due to the tax administration agency’s overly optimistic revenue enhancement strategies, which projected an additional 1.4% in revenues.
The agency has updated its forecasts, indicating a central government budget deficit of 6.2% of GDP in 2025 and 5.8% in 2026, significantly higher than prior estimates of 5.1% and 4.7%. Fitch underscored that the fiscal outlook remains tenuous, noting potential further downturns in forecasts due to persistent revenue shortfalls and the current administration’s unwillingness to cut spending priorities.
In summary, Fitch Ratings has lowered Colombia’s outlook to negative primarily due to fiscal concerns and compliance challenges. The fiscal deficit, projected to rise, suggests an unstable fiscal environment, compounded by government reluctance to adjust spending. The outlook emphasizes increased risks as Colombia navigates budget constraints in the coming years, raising questions about the government’s ability to manage its fiscal responsibilities effectively.
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