Fitch Ratings expects Colombian corporate cash flows to see pressure from rising taxes from the Colombian government as it seeks to offset lower tax revenue from slumping oil prices.
This pressure could be alleviated if the government gains the ability to expand its tax base. Consumers’ disposable income has been also hit by higher personal income tax rates and inflation pressures caused by the sharp currency depreciation.
Fitch revised its previous expectations of GDP growth down, to 3.0 percent in 2015 and 3.5 percent in 2016. Weakening terms of trade and low oil prices have hurt the economy. Economic growth will continue to depend on the country’s fourth-generation infrastructure projects (4G) and a dynamic construction sector.
The Rating Outlook for Colombian corporates is Stable, despite challenging economic conditions. Most corporates continue to maintain conservative credit profiles despite increasing leverage trends.
