Fitch Ratings downgraded Colombia’s outlook to negative due to fiscal concerns. The country’s fiscal deficit exceeded expectations, leading to worries about the ability to manage future deficits. Despite assurances from the finance minister, the projections for the budget deficit in 2025 and 2026 have worsened, reflecting continued economic challenges.
Fitch Ratings has lowered Colombia’s rating outlook to negative from stable, primarily due to concerns over the nation’s fiscal balance and uncertain prospects for immediate corrective actions. The agency retained the credit score at BB, reflecting a central government fiscal deficit of 6.8% of GDP last year, which surpassed Fitch’s earlier forecast of 5.6%.
The ratings agency warned that Colombia’s fiscal risks are mainly unfavorable as the government is likely to face challenges in adhering to fiscal targets, while debt-to-GDP ratios are anticipated to continue increasing. Finance Minister Diego Guevara assured investors last month that Colombia is abiding by its fiscal rule, estimating the budget deficit to shrink to 5.1% of GDP this year despite its current expansion.
Concerns have arisen regarding President Gustavo Petro’s ability to address deficits as fiscal revenues remain weak amid slow economic growth. The 2025 budget commenced with a 12 trillion pesos suspension, deemed inadequate by the fiscal rule oversight committee. In 2024, debt-to-GDP escalated by 6.2 percentage points to 60%, with expectations remaining around 60.6% in 2025, according to the finance ministry.
Fitch indicated significant challenges in achieving the revised fiscal rule target this year, attributing this to the tax administration’s optimistic revenue collection goals of an additional 1.4%. The agency revised its predictions for the central government’s budget deficit to 6.2% for 2025 and 5.8% for 2026, diverging from the previous estimates of 5.1% and 4.7%, respectively.
Fitch highlighted continuous risks to the fiscal outlook, citing potential revenue shortfalls and the Petro administration’s apparent unwillingness to adjust its spending priorities significantly.
The downgrade of Colombia’s outlook to negative by Fitch underscores significant fiscal challenges ahead. The country’s growing fiscal deficit and rising debt-to-GDP ratio illustrate concerns over fiscal management, exacerbated by President Petro’s struggles with revenue generation amid sluggish economic growth. As forecasts for upcoming years have deteriorated, the government’s capacity to meet revised fiscal targets remains in question.
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