October 21, 2018
Economy

Colombia unlikely to meet fiscal targets – Moody’s

Colombia has adjusted its economic forecasts for 2017 and 2018 following a report from investment service Moody’s, in which the company stated that Colombia’s fiscal goals were “ambitious” and unlikely to be met. The organization is now the second investment service to criticize the country’s financial projections, after Fitch issued a similar statement earlier this month.

Samar Maziad, vice president of Moody’s, said in an investor call that “even though Colombia will increase its tax income, it may not be enough to meet its goals in the medium term”.

The investment service has given Colombia a rating of BAA2, which falls within the moderate investment risk category. The category describes the country as having “a high ability to repay short-term debt”. The firm’s forecast has improved in recent years, as the Colombian economy is recovering from low oil prices and a lower credit performance.

Fitch was stronger in its criticism, stating Colombia’s credit rating could be affected if the country’s fiscal deficit is not reduced or is further increased. Also, it declared that budget cuts and higher taxes could potentially hinder the country’s ability to receive foreign investment, and that would be detrimental to economic growth.

Following the release of Moody’s report, Colombia decreased their economic growth forecasts for 2017 and 2018, adjusting them to more realistic figures that align with the forecast of the International Monetary Fund (IMF). Colombia’s GDP is now projected to be 2% in 2017 and 3% in 2018.

This risk assessment company also highlighted the importance of the successful implementation of the peace accords as well as measures to improve the confidence of foreign investors.

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