Latin American Economic Perspectives "Colombia Fiscal Framework: A Chall..."

Research evidence excerpt

Latin American Economic Perspectives "Colombia Fiscal Framework: A Chall..."

A word on oil and other macro assumptions. A few macro assumptions in the MTFF

stand out (Figure 1). First, growth is expected to pick up from 2.2% in 2027 to 2.8% in

2028, driven—according to the government— by the expected productivity gains of the

productive matrix transformation, and the execution of energy and transportation

investment projects. Second, inflation forecasts look somewhat optimistic despite recent

pressures in core inflation after the large 2026 minimum wage increase (MTFF:

6.0%/4.4% for 2026–27 vs. UBSe: 6.4%/4.7%). In oil, the government keeps its usual

conservative stance, assuming Brent at USD 85.5 and 74.9/bbl for 2027–28. Our energy

team expects prices about USD 8 higher in both years. While uncertainty remains—

especially around a path to resolution of Middle East tensions—we see scope for oil

revenues to help ease fiscal pressures next year, adding roughly 0.4%–0.6% of GDP in

revenues, assuming gradual fuel subsidy cuts continue (note the government is also

assuming an increase in these revenue lines, but smaller than ours on account of their

price assumptions).

Key signposts to watch

The Jun 21 runoff and the proclamation of the presidential election winner open a new

phase with attention shifting to the conformation of the new government, first

ministerial cabinet appointments, and its first policy signals. On the fiscal front, the start

of the legislative session kicks off a busy second half of the year as Colombian law states

that the budget should be presented no later than Jul 29. With the new administration

taking office in Aug 7 and first budget debates expected by mid-Aug, potential

amendments to the budget bill will need to be addressed in few days.