Standard & Poor’s Lowers Colombia’s Long-Term Foreign Currency Sovereign Credit Rating to BBB-

Big three rating agency Standard & Poor’s has lowered Colombia’s long-term foreign currency sovereign credit rating from BBB to BBB-. The agency’s outlook for the rating is stable.

The one-notch downgrade leaves the nation dangerously close to junk status, something that policymakers in Bogotá have been working to avoid for better part of two years since the economy began to wobble in the wake of oil prices plummeting.

Specifically, S&P highlighted Colombia’s “diminished policy flexibility” due to “weakened fiscal and external profiles” and external debt in its analysis following the move.

The New York-based agency also downgraded Colombia’s long-term local currency sovereign credit rating from BBB+ to BBB.

S&P had previously affirmed Colombia’s higher sovereign in January following a tax reform that helped to plug holes in the federal budget. But even then it had maintained a negative outlook, and a year of low economic growth, in addition to other negative trends for certain fiscal fundamentals, has led to the downgrade.

Colombia’s economy grew by just 2.0% in 2016, which was the lowest expansion since 2009. The majority of financial analysts — including those from the International Monetary Fund (IMF), the Ministry of Finance in Bogotá, and the Colombian central bank — expect the 2017 GDP growth rate to to come in even below that figure.

Following the announcement from S&P, Colombian Finance Minister Mauricio Cárdenas stated that he thinks the central bank should leave the nation’s key interest rate on hold next week at its final meeting of the year. “I believe that with this news it would probably be convenient to take a break, analyze the decision, evaluate the moment, and resume cuts from January next year,” said Cárdenas, according to Reuters.