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COLOMBIA: JP Morgan Says Spending Cuts Likely Needed To Honour Fiscal Rule

COLOMBIA
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  • Fiscal data for January revealed a widening in the primary deficit to 0.5% of GDP (from 0% in Jan ’24), driven by increased spending on the back of a significant budget backlog. Meanwhile, the headline deficit, including interest payments, widened 0.6%-points to 0.7% of GDP. On a 12-month basis, the primary deficit reached 2.9% of GDP by January, with the headline deficit climbing to 7.4%.
    • JP Morgan says that seasonally adjusted figures paint an even more concerning picture, with the primary deficit over the last three months running at an annualised pace of 3.0% of GDP, while the headline deficit stands at 8.8%. They anticipate a 5.8% of GDP fiscal deficit this year, although believe that risks are skewed towards a wider deficit.
    • JPM says that the good news is that the trend of recovering tax collection persisted into January. Meanwhile, February budget execution data suggest the Treasury is being more prudent on the spending side, when excluding the significant budget backlog from 2024. When the significant backlog is included, however, spending has started the year on expansive mode again.
    • JPM expects fiscal revenues to gain this year, although below what has been outlined by the Treasury. As a result, they anticipate that spending cuts and budget under-execution will likely be required again by Hacienda to honour the fiscal rule.
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  • Fiscal data for January revealed a widening in the primary deficit to 0.5% of GDP (from 0% in Jan ’24), driven by increased spending on the back of a significant budget backlog. Meanwhile, the headline deficit, including interest payments, widened 0.6%-points to 0.7% of GDP. On a 12-month basis, the primary deficit reached 2.9% of GDP by January, with the headline deficit climbing to 7.4%.
    • JP Morgan says that seasonally adjusted figures paint an even more concerning picture, with the primary deficit over the last three months running at an annualised pace of 3.0% of GDP, while the headline deficit stands at 8.8%. They anticipate a 5.8% of GDP fiscal deficit this year, although believe that risks are skewed towards a wider deficit.
    • JPM says that the good news is that the trend of recovering tax collection persisted into January. Meanwhile, February budget execution data suggest the Treasury is being more prudent on the spending side, when excluding the significant budget backlog from 2024. When the significant backlog is included, however, spending has started the year on expansive mode again.
    • JPM expects fiscal revenues to gain this year, although below what has been outlined by the Treasury. As a result, they anticipate that spending cuts and budget under-execution will likely be required again by Hacienda to honour the fiscal rule.