Colombia Economic Outlook. March 2025

Summary

Colombia’s economy will grow 2.5% in 2025 and 2.9% in 2026, driven by consumption and investment. Inflation will continue declining, though housing and energy costs will remain rigid. Monetary policy will gradually lower rates, while the external deficit will widen due to rising imports and lower remittance inflows.

Key points

• Key points:
• Domestic demand will be the main driver of growth over the next two years. Goods consumption, which saw a partial recovery in 2024, will expand strongly in 2025 due to lower interest rates and higher real incomes. However, by 2026, consumption growth will lose momentum as households normalize their spending levels.
• Fixed investment will see a significant rebound, growing by 5.1% in 2025 and 6.0% in 2026. Machinery and equipment spending will lead in 2025, while housing construction will gain traction in 2026. Growth in non-residential buildings will be driven by the dynamism of commerce and industry.
• Despite the projected decline in inflation, some components will remain rigid. Wage indexation and adjustments in regulated service prices will prevent a rapid convergence to the central bank’s target.
• The policy interest rate will continue its gradual decline to 7.75% by the end of 2025 and 7.25% in 2026. However, this adjustment will depend on the Federal Reserve’s actions, domestic fiscal policy, and exchange rate volatility. The exchange rate is projected at 4,350 pesos per dollar by the end of 2025 and 4,230 by December 2026.
• The current account deficit will widen in the coming years, reaching 2.7% of GDP in 2025 and 3.1% in 2026, driven by faster import growth relative to exports. Remittances, a key source of external income, will begin to stabilize with a slight downward adjustment. Foreign direct investment will continue financing the external imbalance, albeit with lower coverage margins.

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