Fitch Release Report On Prospects Under the Petro Administration

President-elect Gustavo Petro’s administration will likely provide policy continuity on many fronts. However, there are uncertainties over the medium-term outlook due to some proposals, including changes in oil and gas policies and environmental regulations, Fitch Ratings analysts Shelly Shetty and Richard Francis write in a note. (BBG)

• Petro’s platform includes higher social spending paid for by tax increases, seeking to boost revenues by approximately 4% of GDP, half for new spending and half for deficit reduction.
• Pension reform giving the public sector a greater role is also part of his policy platform.
• Fitch expect specific policy proposals to be submitted to Congress over the coming months.
• Fitch expect a significant reduction in Colombia’s fiscal deficit next year due to higher revenues from the 2021 tax reform and lower pandemic-related spending. Spending pressures from fuel subsidies and indexation mechanisms on the back of high inflation remain.
• Petro’s push for large increases in social expenditure could lead to higher deficits over the medium term if revenues underperform.