Colombia’s Economic Growth Exceeds Expectations

Colombia’s economy has surpassed even the most optimistic forecasts, with a notable 3.6% growth in its Gross Domestic Product (GDP) during the third quarter of 2025. This represents the highest growth rate since the pandemic’s onset and significantly outpaces the 3.2% expected by most economists. According to a report by The Economist, Colombia stood out as the best-performing economy in Latin America in 2025, ranking fourth globally.

What’s Driving Economic Success?

Experts indicate that several factors are contributing to this unexpected growth. Jose Antonio Ocampo, former Minister of Agriculture and Finance and a professor at Columbia University, explains that robust public and private consumption are key drivers behind the economic upturn. Juan Carlos Mora, the president of Bancolombia, added, “The economy is performing much better than public perception suggests. We’re witnessing substantial improvements in overdue loan portfolios, with both companies and individuals making timely payments.”

A Positive Economic Landscape

Recent data showcases an encouraging trend in Colombia’s economic recovery following the pandemic. “Colombia is showing growth close to its potential rate of 3%,” stated Nicolás Barone, an analyst from Deloitte for the Andean region. Private consumption has rebounded positively, especially after a period of stagnation in previous years.

Employment figures are also promising, with the unemployment rate now at 8.2%, a historic low. Barone commented, “This number is more than satisfactory for Colombia.” However, Ocampo pointed out that while informal employment remains high, a notable portion of the job growth this year has been in formal sectors.

Resilience Amid Challenges

Despite the geopolitical tensions involving U.S. tariffs under Donald Trump, Colombia has not been among the worst affected countries. The nation is subject to a general 10% tariff for exports to the United States applicable to most Latin American countries and has benefited from increased coffee prices. Barone noted, “The agricultural sector, which employs many people, has performed well despite external pressures.”

However, certain illegal crops, such as coca, might have had an indirect stimulating effect on the economy, though quantifying this remains challenging due to the absence of official figures. Additionally, the Colombian peso has appreciated against the dollar, influenced by factors like rising U.S. public debt and the Federal Reserve’s interest rate cuts, benefiting various Latin American currencies.

Economic Challenges Ahead

Not everything is looking up for Colombia, as underlying concerns remain. “Behind the façade of growth, there are warning signs,” remarked Marc Hoffstetter from the University of Los Andes. He highlighted unsustainable public spending as a driving force behind the current economic activity. Foreign investment figures have been dismal for several years, raising concerns about sustaining this growth momentum.

Many analysts believe that increased private consumption may largely stem from the high levels of public employment, which could be jeopardized by necessary fiscal reforms. Predictions point to a public deficit of around 6.2% by the end of 2025, alarming both experts and authorities alike. Other critical issues include a decline in the mining and oil sectors, compounded by falling international crude prices and rising hydrocarbon taxes instituted by Petro’s administration. Additionally, stagnant inflation presents ongoing challenges.

The Role of Government

Contrary to initial predictions that Gustavo Petro’s administration would lead to economic collapse, the Colombia economy has shown stability since his election in 2022. According to Deloitte, the trajectory has been “moderately positive,” and Petro has introduced significant reforms, including labor reforms aimed at improving wages for formal workers, though these have faced legislative hurdles.

Even though these reforms have sparked fears among some employers regarding increased labor costs, government officials maintain that they will protect workers and strengthen the economy. Ocampo cautions that the fiscal deficit generated by rising public spending remains the most pressing issue and has yet to be effectively addressed by the government.

Looking Ahead

The upcoming elections in May will be pivotal for Colombia’s future. Regardless of who takes office next, addressing the public deficit and achieving fiscal balance will be paramount. Ocampo states, “The next government will face the complex task of implementing adjustments,” hinting at potential layoffs for public employees among the first of many uncomfortable choices awaiting the new leader.

Barone believes that these adjustments could be phased in and avoid drastic measures for now. He summed it up perfectly: “We are at a moment of early alert.” If Colombia can rectify its fiscal deficit without alienating market confidence, it could continue on its growth path, working toward alleviating structural issues like informality and inequality.

As Barone concluded, “The outlook for Colombia in 2026 leans toward cautious optimism.”

Key Takeaways

• Colombia’s GDP grew by 3.6% in Q3 2025, exceeding predictions.
• Public and private consumption are driving economic growth.
• Despite strong performance, underlying economic risks persist, including a high public deficit.
• The upcoming elections will significantly influence Colombia’s fiscal policies and economic outlook.