Colombia Economic Outlook. December 2024

Summary

GDP will grow 2.5% in 2025 and 3.2% in 2026, driven by private consumption in durable goods, semi-durables, and services starting in 2026, and by fixed investment in infrastructure, machinery, and housing. Inflation will be 3.1% in 2026, with lower interest rates strengthening financial conditions.

Key points

• Key points:
• Fixed investment will grow 3.9% in 2025 and 7.3% in 2026, led by civil works and machinery. Residential construction will recover from mid-2025. Private consumption will grow 3.1% in 2025, driven by durable and semi-durable goods, and 2.9% in 2026, when services will regain momentum due to better labor and financial conditions.
• Inflation will moderate to 3.6% in 2025 and 3.1% in 2026. Banco de la República’s interest rates will fall to 6.5% in 2025, reflecting inflation converging to its target and ensuring better financial conditions to support economic recovery.
• The current account deficit will reach 3.2% of GDP in 2025 and 3.5% in 2026, driven by higher imports of capital goods and raw materials, consistent with the growth of domestic demand. This deficit will be primarily financed by foreign direct investment.
• The national unemployment rate will decline to 9.9% in 2025 and 9.8% in 2026, with job creation in manufacturing, construction, and services. While improving, gaps in labor force participation among youth and women remain a challenge.
• Current gross domestic savings, at 10.5% of GDP, limit the capacity to finance necessary investment. Diversifying exports, continuing to attract foreign direct investment, and strengthening public and private savings are essential.

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