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Analyst Views On Medium-Term Fiscal Framework

COLOMBIA
  • HSBC believe that the fiscal rule has been pushed to the limit and instead of taking the favourable starting point to improve fiscal dynamics, the government is using that space to curb the needed fiscal correction. They see several ways the proposed fiscal path could end up not being enough to keep the debt to GDP ratio at the 55% level, including optimistic assumptions on GDP growth and potential COP weakness. Indeed, given the confluence of negative risks, HSBC expect COP to continue underperforming LatAm FX for the rest of the year.
  • Goldman Sachs view the updated fiscal guidance as a step in the right direction. The materialisation of some of the fiscal risks highlighted in the past required a reduction in primary spending to avoid resorting to debt issuance to fund the budget at very costly terms. Still, GS deem the spending adjustment as too “backward-looking” and given limited fiscal buffers, additional spending adjustment (or debt issuance) cannot be ruled out should tax revenue continue to disappoint, which they view as a plausible scenario.
  • JP Morgan note that the MTFF confirmed the dire deviation of fiscal revenues from what was entertained in both the 2024 Budget Law and early year Financial Plan. They expect fiscal deficits will continue to run wide and so financial needs will stay elevated. For 2025, the GNC's financing needs are estimated at 8.3% of GDP, of which 5.1% of GDP is allocated to financing the deficit.
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