Colombia Economic Outlook. October 2024

Summary

Domestic demand will lead Colombia’s economic recovery, driven by improved financial conditions that will strengthen consumption and investment. This will provide a significant boost to sectors such as manufacturing and retail. In the long run, increasing investment will be essential to raise the country’s growth potential.

Key points

• Key points:
• Global growth is projected at 3.1% in 2024 and 3.3% in 2025, supported by moderating inflation and interest rate cuts. The U.S. economy is heading for a soft landing, while the Eurozone will experience a modest but fragile recovery. Meanwhile, China will continue to face structural challenges limiting its momentum.
• Colombia’s GDP will grow by 2.0% in 2024, accelerating to 2.8% in 2025 and 3.5% in 2026, driven mainly by domestic demand. Private consumption, particularly in goods, along with a recovery in infrastructure and machinery investment, will fuel growth. Investment in housing will pick up from mid-2025 onwards.
• Inflation in Colombia will end 2024 at 5.4%, falling to 3.8% in 2025, nearing the central bank’s target, driven by smaller price increases in food and non-food goods. By 2026, inflation is expected to stand at 3.4%.
• The unemployment rate will rise to 10.2% in 2024, before decreasing to 10.0% in 2025 and 9.7% in 2026, supported by the recovery of formal employment, particularly in the private sector, which will strengthen household consumption.
• The fiscal deficit will close at 5.6% of GDP in 2024, before falling to 4.7% in 2025 and 4.3% in 2026. Both public revenues and expenditures will remain higher than pre-pandemic averages. The current account deficit, meanwhile, will be 2.9% of GDP in 2024 and will widen to 3.5% in 2025 and 3.8% in 2026, largely financed by foreign direct investment.

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