Estudio Economico

1. Fitch on Colombia
Outlook for Colombia in a Turbulent
Global Backdrop
Richard Francis
Senior Director, Co-Head of the Americas
Sovereigns Group
26 August 2022

2. 1
Latam Ratings Stabilize After Wave of Downgrades, But Challenges and a
Few “Weak Links” Remain
2015 2016 2017 2018 2019 2020 2021 2022 Actual
Chile   A-/Stable
Peru  BBB/Stable
Mexico   BBB-/Stable
Panama  BBB-/Stable
Uruguay BBB-/Stable
Colombia   BB+/Stable
Paraguay   BB+/Stable
Aruba  BB/Stable
Brazil    BB-/Stable
Guatemala  BB-/Positive
Dom. Rep.  BB-/Stable
Jamaica   B+/Stable
Costa Rica    B/Stable
Bolivia     B/Stable
Ecuador     B-/Stable
Nicaragua   B-/Stable
Argentina     CCC
El Salvador     CCC
=downgrade, =upgrade, ◼= Negative Outlook, ◼= Positive Outlook, X= default/DDE
Source: Fitch Ratings.

3. 2
Better-than-Expected Growth Recoveries in LatAm, But Largest
Economies Hold Back Overall Regional Growth
90
95
100
105
110
115
120
125
130
2019 2020 2021 2022F 2023F 2024F
EM Asia EM Europe LatAm MENA SS Africa
Source: Fitch Ratings
Better-than-Expected Recoveries
Real GDP, 2019 = 100
80
85
90
95
100
105
110
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
1Q21
2Q21
3Q21
4Q21
1Q22
Mercosur Andean Mexico Central America USA
Source: Fitch Ratings
Mixed Recoveries Within Latam
Real GDP Index, 2019 = 100, seasonally adjusted

4. 3
But a Multifaceted Global Shock is Underway: War, Inflation, Fed
Tightening, China Slowdown
-2
0
2
4
6
8
10
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Inflation Policy Rate
Source: Haver.
USA: Inflation and Fed Funds Rate
(% YoY and % per annum)
50
60
70
80
90
100
110
120
130
2019
2020
2021
2022
Retail Sales Industrial Production
Source: Haver.
China: Retail Sales and Industrial Output
(Index, 2019=100)
10
20
30
40
50
60
70
2019
2020
2021
2022
Composite Manufacturing
Construction Services
Source: Haver, S&P Global.
Euro Area: Purchasing Manager Indices
(Index, 50=neutral)

5. 4
Further Downward Growth Revisions Likely For World’s Largest
Economies, Picture More Mixed Among Emerging Markets
0
1
2
3
4
5
6
7
8
9
2021
2022
2023
2024
2021
2022
2023
2024
2021
2022
2023
2024
2021
2022
2023
2024
USA Eurozone China Other EM
Jun-2022 Projections Mar-2022 Projections
Source: Fitch Economics, June-2022 and March-2022 Global Economic Outlook (GEO)
Real GDP Growth Projections
(% YoY)

6. 5
LatAm Is Not Immune: Higher Commodity Prices a Boon for Some, But
Also a Headwind for Everyone
0
2
4
6
8
10
12
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
Latam ex. Argentina World
Inflation Policy Rate
Source: Fitch Ratings.
Inflation and Monetary Tightening
(% YoY and % per annum, weighted averages)
80
90
100
110
120
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Latam EM Asia
Source: IMF WEO (April 2022)
Terms of Trade
(Index, 2012=100)
70
75
80
85
90
95
100
105
110
115
120
125
2015
2016
2017
2018
2019
2020
2021
2022
Colombia (oil) Ecuador (oil)
Mexico (oil) Chile (copper)
Peru (metals) Bolivia (gas)
Source: Fitch Ratings based on national sources.
Commodity Production
(Index, 2015=100, 12mn rolling)

7. 6
Colombia’s Rating History
1994
1998
2002
2006
2010
2014
2018
2022
Source: Fitch Ratings
BB+
BB
BBB+
BBB
BBB-
BB-
Rating History
Key Indicators
2021 2022F 2023F
Real GDP growth (%) 10.7 6.0 2.4
Inflation (%) 3.5 8.0 5.0
Central government balance (% of GDP) -7.8 -6.2 -4.4
General government debt (% of GDP)a 58.5 60.2 60.4
Current account balance (% of GDP) -5.7 -5.6 -4.8
International reserves, incl. gold (USDbn) 58.0 58.0 58.0
Net external debt (% of CXR) 102.8 101.0 104.1
a General government includes central government, provincial, regional and local governments, social
security funds and extra-budgetary funds.
Source: Fitch Ratings

8. 7
Growth Outlook: Rebound after Sharp Contraction
Risks to Medium-Term Outlook
-8
-6
-4
-2
0
2
4
6
8
10
12
2010 2012 2014 2016 2018 2020 2022F
(%)
Real GDP Growth
Colombia
BB median
Source: Fitch Ratings
-10
-5
0
5
10
15
Q2-13
Q3-13
Q4-13
Q1-14
Q2-14
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Q4-16
Q1-17
Q2-17
Q3-17
Q4-17
Q1-18
Q2-18
Q3-18
Q4-18
Q1-19
Q2-19
Q3-19
Q4-19
Q1-20
Q2-20
Q3-20
Q4-20
Q1-21
Q2-21
Q3-21
Q4-21
Q1-22
Q2-22
(% yoy)
Quarterly GDP Growth
4Q rolling sum
Source: DANE

9. 8
Inflation Picks Up, Unemployment Remains High
Monetary Policy to Remain Supportive While Unemployment Will Continue to Dent Growth
Prospects
0
5
10
15
20
25
may
18
jul
18
sep
18
nov
18
ene
19
mar
19
may
19
jul
19
sep
19
nov
19
ene
20
mar
20
may
20
jul
20
sep
20
nov
20
ene
21
mar
21
may
21
jul
21
sep
21
nov
21
ene
22
mar
22
may
22
(%)
National Unemployment Rate
Seasonally Adjusted
Source: DANE
0
2
4
6
8
10
12
jul
17
ene
18
jul
18
ene
19
jul
19
ene
20
jul
20
ene
21
jul
21
ene
22
jul
22
Colombia
Policy Rate
Inflation
Source: DANE, Banco de la Republica

10. 9
Fiscal Policy Credibility is Being Tested
-9
-8
-7
-6
-5
-4
-3
-2
-1
0
1
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F2022F2023F
(% GDP)
GG Balance
Colombia
BB median
Source: Fitch Ratings
0
10
20
30
40
50
60
70
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F2022F2023F
(% GDP)
GG Debt
Colombia
BB median
Source: Fitch Ratings

11. 10
• Economic Growth - Slower Growth and Investment Climate. Especially Oil Sector
• Inflation – High inflation with pressures on wages, indexation. Higher interest rates. Stabilization fund.
• Fiscal and Debt Trajectory – the ability to achieve fiscal adjustment and bring down debt. Outlook for tax
reform and social expenditures.
• External Imbalances – large current account deficit. Ability to attract FDI. Portfolio flows with external
tightening conditions.
• Politics – ability to achieve Congressional approval for reforms. Peace accords and security.
• External Relations – Especially with Venezuela and the United States.
Challenges and Opportunities for Incoming Petro Administration

12. 11
Current Account Deficit Remains High
-20
-15
-10
-5
0
5
dic
13
jun
14
dic
14
jun
15
dic
15
jun
16
dic
16
jun
17
dic
17
jun
18
dic
18
jun
19
dic
19
jun
20
dic
20
jun
21
dic
21
jun
22
(USD bn)
Trade Balance
12m rolling sum
Source: Fitch Ratings, DANE
-8
-6
-4
-2
0
2
4
-40.000
-30.000
-20.000
-10.000
0
10.000
20.000
Q2-12
Q4-12
Q2-13
Q4-13
Q2-14
Q4-14
Q2-15
Q4-15
Q2-16
Q4-16
Q2-17
Q4-17
Q2-18
Q4-18
Q2-19
Q4-19
Q2-20
Q4-20
Q2-21
Q4-21
(USD mn)
Current Account
Goods Services
Primary Income Secondary Income
Source: Banco de la Republica

13. 12
Net External Debt Rising Amidst High Current Account Deficits
-5,0
-4,0
-3,0
-2,0
-1,0
0,0
1,0
2,0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022F 2023F
(% GDP)
Current Account Balance Plus Net FDI
Source: Fitch Ratings
0
5
10
15
20
25
30
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022F2023F
(% GDP)
NXD
Colombia
BB median
Source: Fitch Ratings

14. 13
Inequality and Political Challenges Remain - Co and median
0
20
40
60
W
Eur
E
Eur
AsiaPac
SubSAf
LatAm
ARG
PER
BOL
ECU
CHL
MEX
COL
BRA
ª Latest available within past five years
Source: Fitch Ratings, World Bank
Gini Coefficientª
(Score: 0–100)
Political stability
Government
effectiveness
Rule of law
Control of corruption
Voice & accountability
Regulatory quality
Governance Indicators
Percentile rank

15. 14
Colombia (BB+/Stable)
SRM Output Qualitative Overlay FC IDR
BB+
Factor Notch adjustment
BB+
Macroeconomic 0
Public finances 0
External finances 0
Structural features 0
Total 0
Negative Sensitivities
 Public Finances: A failure to achieve fiscal consolidation that leads to a
significant deterioration in Colombia's general government debt to GDP
ratio relative to the 'BB' peer median;
 Macro: Diminished medium-term growth prospects well below Colombia's
historical potential of 3.3%, with adverse ramifications such as high
unemployment and poverty levels;
 External Finances: A large increase in net external debt to GDP, raising
external vulnerabilities.
Positive Sensitivities
✓ Public Finances: Achieving of fiscal consolidation consistent with a
steadily declining GGGD to GDP ratio and enhanced fiscal policy
credibility;
✓ Macro: Higher sustained medium-term economic growth above
Colombia's historical averages of about 3.3%;
✓ Structural: Improvement in governance indicators indicative of
improved social cohesion and momentum around reforms that could
improve Colombia's structural fiscal position and medium term
growth prospects.

16. New York
33 Whitehall Street
New York, NY
10004
London
30 North
Colonnade
Canary Wharf
London, E14 5GN
fitchratings.com
15
Richard Francis
Senior Director
Sovereigns
richard.francis@fitchratings.com
Contact

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