Colombia’s long-term foreign currency sovereign credit rating was slashed by S&P to BB+ from BBB- and its long-term local currency rating was lowered to BBB- from BBB. The outlook on Colombia’s long-term ratings remains stable. The short-term foreign currency rating was also downgraded to B from A-3.
The rating was driven by the withdrawal of fiscal reforms introduced to Congress with a context of huge spending pressures, which resulted in a lower probability of Colombia improving its fiscal position after the recent deterioration. S&P explained that Colombia is no longer consistent with an investment-grade rating given its high external vulnerability and moderate economic profile, predicting that debt levels will stabilize at around 60% of GDP during 2021-2022 and given its relatively large fiscal deficits. The rating agency added that the stable outlook reflects its expectation of economic recovery in 2021, as the combination of renewed GDP growth and specific fiscal measures will most likely curtail Colombia’s fiscal deficit in a gradual manner.
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