Risk agency Moody’s kept Colombia’s credit rating at Baa2, but downgraded the rating outlook to negative from stable, pointing to a slower pace of fiscal consolidation and the prospect of little chance of additional budgetary measures by a new government.
Moody’s said that its decision to affirm the Baa2 ratings reflects the strength of Colombia’s credit profile and relatively low external vulnerability.
“On several rating factors, including growth, economic size, and institutional factors, Colombia’s credit metrics remain in line with Baa2-rated peers,” Moody’s reported in a new assessment on the country.
According to Moody’s, Colombia’s ratings could be downgraded if the economic growth remains below potential and if the next government were unable to present a credible plan for medium-term fiscal consolidation, or is unable to garner support in Congress for the additional fiscal measures under such a plan.
“Given the assigned negative outlook, a rating upgrade is unlikely shortly,” Moody’s clarified.
Meanwhile, Moody’s said it might change the outlook on Colombia’s rating back to “stable” if the next government eventually implement a comprehensive package of fiscal measures to reduce the fiscal deficit and limit further erosion of fiscal strength. “Greater clarity over fiscal reforms would also contribute to restoring investor confidence and be credit positive by supporting growth prospects,” Moody’s said.