The ratings agency's decision is supported by key debt and fiscal metrics that would remain in line with those of similarly rated peers due to continued fiscal consolidation. Likewise, it highlights the role that Congress and the judiciary have played in preserving economic policy in the last year.
"During the first year of President Petro's administration, the institutional checks and balances have been in place preventing a significant deviation from Colombia's traditionally prudent policy management." Moody's says.
In addition to this, he says that the alliances in Congress are likely to force the president to review his reforms on health, pensions and labor issues in order to build political consensus. “In doing so, the resulting policies are likely to lead to preserving the country's macroeconomic and fiscal stability,” he says. According to the rating agency, the stable outlook incorporates expectations that institutional arrangements will continue to play a stabilizing role.
Moody's expects the Colombian economy to experience a period of slower economic activity this and next year. At the same time, it projects a decrease in inflation, a reduction in external imbalances and compliance with the fiscal rule.
It must be remembered that while Fitch Ratings and Standard & Poor's removed Colombia's investment grade in 2021 after the government of Iván Duque withdrew the tax reform of former minister Alberto Carrasquilla and the national strike began, Moody's maintained the note.
