BOGOTA (Reuters) -If a planned fiscal consolidation in Colombia fails to stabilize public debt and comply with fiscal rules, it could lead to a ratings downgrade for the Andean nation, a top Moody’s analyst said on Tuesday.
The nation’s economy is seen growing 2.5% this year, Renzo Merino, a sovereign risk analyst at the ratings agency, said at an event hosted by Moody’s in Bogota.
Colombia holds a Baa2 rating from Moody’s, and in June of last year, the ratings agency lowered its outlook for the country to “negative” from “stable” on macroeconomic conditions which complicate the management of Colombia’s public finances.
“We have begun to see certain risks,” Merino said.
“The problem for Colombia is that, in relative terms, it spends much more than what it brings in,” Merino said, adding spending cuts had not been enough.
With presidential elections set to take place next year, a key issue for the next president will be the amount of debt inherited and whether the incoming administration will be able to reverse a deterioration of public finances, Merino said.
Colombia’s finance ministry targets a fiscal deficit of 5.1% of gross domestic product (GDP), which analysts view as unlikely.
(Reporting by Nelson Bocanegra; Editing by Aida Pelaez-Fernandez and Andrea Ricci)
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