Itaú BBA - Macro Scenario – Colombia: With a little help from the IMF

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Macro Scenario – Colombia: With a little help from the IMF

December 11, 2020

The government accessed the FCL amid a challenging fiscal situation, while a tax-reform is expected in 2021.


• With the pandemic wreaking economic havoc and pressure for increased spending, fiscal accounts deteriorated and led to Colombia being the first in the globe to access the IMF’s flexible credit line.

• The precarious fiscal situation has led all three main rating agencies to hold a negative outlook for the country’s sovereign rating. They have also signaled that key to retaining an investment grade rating would be advancing a structural, yet unpopular, tax reform during 2021.
• Back-to-back downside surprises to inflation led us to revise our forecast to 1.5% for this year (from 2%, previously). However, the unwinding of subsidies and other support measures mean inflation remains on track to converge to the target in 2021.
• Given the change of guard at the central bank and the willingness to evaluate how the economy responds to past easing, we believe the rate-cut cycle has ended. We expect stable rates at 1.75% for most of 2021, with rates reaching 3.5% in 2022 as the normalization process unfolds.


João Pedro Bumachar
Vittorio Peretti
Miguel Ricaurte



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