Building confidence key challenge for Colombia's next president - Moody's

"Investment will play a very important role to have a growth level closer to 3.5% or 4% in the medium term and this will be due to confidence," Renzo Merino, a Moody's senior vice president and its principal analyst for Colombia, said at an event. Merino cited Mexico as an example, where Moody's lowered the rating to Baa2 from Baa1 at the beginning of the month, saying weak investment dynamics were an important driver of economic underperformance.

Generating confidence will be a key challenge for Colombia's next president, Gustavo Petro, to ensure continued investment and maintain economic growth at levels to avoid fiscal complications, an executive for ratings agency Moody's said on Tuesday.

Moody's holds a credit rating of BAA2 with a stable outlook for Colombia. "Investment will play a very important role to have a growth level closer to 3.5% or 4% in the medium term and this will be due to confidence," Renzo Merino, a Moody's senior vice president and its principal analyst for Colombia, said at an event.

Merino cited Mexico as an example, where Moody's lowered the rating to Baa2 from Baa1 at the beginning of the month, saying weak investment dynamics were an important driver of economic underperformance. Colombia's economy will grow above the average for the region this year, Merino added.

The Andean country's current government revised its economic growth target for 2022 to 6.5% from an original 5%, in line with analyst expectations. Analysts also predict economic growth will slow to an average of 2.5% in 2023.

Petro, who will become Colombia's first leftist president on Aug. 7, has caused uncertainty among investors and business leaders over plans to halt further oil and gas contracts, as well as an ambitious tax reform to raise an extra 50 trillion pesos per year ($11.2 billion). "In a neutral scenario (...) we believe that a reform could help maintain social spending which began in the pandemic," Merino said, adding such a move would help recover advances in tackling poverty and inequality, while helping to cut Colombia's fiscal deficit.

The new government must comply with Colombia's fiscal rule - a measure imposed in 2011 to prevent the deterioration of public finances - and address social tensions following protests in 2021, which implies political as well as investment risk, Merino said.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)