The rating agency Moody’s Ratings maintained Colombia’s sovereign rating at Baa2, thus maintaining its investment grade. But the outlook changed from stable to negative.
Senior unsecured foreign currency ratings in (P)Baa2 and short-term local and foreign currency issuer ratings at Prime-2 (P-2).
According to the rating agency, the change in outlook is due to the country’s challenging macroeconomic conditions, which are associated with weak economic growth for this year, a sustained increase in the cost of borrowing which could deteriorate fiscal management and the credit profile going forward.
Just two weeks ago, before presenting the Medium-Term Fiscal Framework, the rating agency had already warned about Colombia’s credit profile, which could be deteriorated by the current macroeconomic context that the country is going through, with low tax collection and budget defunding.
“The negative outlook reflects that macroeconomic conditions are complicating fiscal management, as lower-than-expected economic growth is negatively affecting tax revenues.” and higher financing costs are putting additional pressure on the Government’s accounts“, says the risk rating agency’s report.
He added that together these factors are hampering the current and future capacity of the authorities. to comply with the fiscal rule, which increases the risk of a possible deterioration of Colombia’s credit profile.
However, in its current report, the rating agency highlights the country’s institutional framework as a positive aspect, which translates into the correct functioning of checks and balances. He also stressed that the Bank of the Republic continues to manage monetary policy independently.
The Minister of Finance and Public Credit, Ricardo Bonilla, has already reacted to the change in perspective and highlighted that “theThe risk rating agency has placed a vote of confidence in the country, highlighting the strong decisions to cut spending in order to maintain fiscal sustainability and macroeconomic that the Government of President Petro has taken.”
