Rhythmic Reasoning_Full Report_Final_EN - Flipbook - Page 38
RHYTHMIC REASONING | TEMPO, TIMING AND TUNING
CO LO M B I A
Juan Manuel Herrera Betancourt
Jackeline Pirajan Diaz
Senior Economist, Investment Strategy
Head Economist, Colombia
2024
2025f
2026f
GDP Growth
2.1%
1.6%
2.6%
2.9%
Inflation
5.1%
6.6%
5.3%
4.0%
Unemployment
8.6%
10.2%
9.5%
10.4%
Budget Bal.
-5.9%
-5.7%
-7.3%
-6.7%
Latest
2024
1-yr fwd
2-yr fwd
2-yr yield
9.2%
9.3%
10.8%
12.5%
10-yr yield
11.3%
11.9%
11.8%
12.5%
Yield curve slope
2.1%
2.6%
1.0%
0.0%
Source: Scotia Wealth Management, Bloomberg Finance LP.
"Latest" values are as at September 30, 2025 and, for data other than bond yields,
pertain to the most recent monthly, quarterly, or annual reading available on
this date. GDP, inflation, and unemployment forecasts are based on Scotiabank
Economics forecasts dated September 11, 2025, budget balance forecasts
are based on median consensus estimate compiled by Bloomberg | 2024
inflation and unemployment are based on the average YoY rates for each
month of the year. | 2024 yields are as at December 31, 2024. Forward periods
are relative to September 30, 2025 and are based on forward market pricing.
KEY CONCLUSIONS
•
•
•
•
Colombia’s economy has outperformed expectations so
far in 2025, as greater private sector strength overtakes the
public sector in driving economic momentum to a projected
expansion of 2.6% this year and ~3.0% in 2026.
The country’s ~2.5% expansion over 1H25 was supported by
firm growth in household spending, with solid performance
for the wholesale/retail trade, transportation, and hospitality
sectors spearheading GDP growth in 2025.
Colombia’s sectoral drivers tend to have a high degree
of informality, however, lacking direct tax benefits for
Colombia’s government whose deficit of ~7% of GDP allows
for very limited public spending growth as markets monitor
public finances with concern.
Elevated and stubborn inflation, and fears over the incoming
2026 minimum wage hike, have also paused BanRep rate
cuts that may only resume until 1Q26. Electoral anxiety
ahead of and following the May 2026 elections could also
limit policy easing and dampen Colombia’s economic
recovery.
Colombia’s economy has outperformed expectations so far in
2025, reflecting a greater participation by the private sector
in strengthening economic momentum after a period of public
sector-driven gains, towards a projected expansion of 2.6% this
year, accelerating to ~3.0% in 2026 in line with its potential
growth rate. The current economic backdrop and its outlook face
some headwinds, however, that could derail or cap Colombia’s
improving fortunes. Highly-restrictive monetary policy, hamstrung
public finances, and presidential elections in 2026—alongside
global tariffs anxiety—will all stand as headwinds to watch over the
next few quarters.
The country’s ~2.5% expansion over the first half of 2025
(compared to ~1% in 1H24, Fig. 1)) was supported by a near-4%
growth in household spending. These consumption gains have
been reflected in a solid performance for the wholesale/retail
trade, transportation, and hospitality sector that, at 5% y/y in 1H25,
is expanding around its best pre-pandemic pace to spearhead GDP
growth in 2025. Retail sales have surged this year, expanding by
over 10% y/y in the year-to-July excluding fuel and vehicles, eyeing
their best ex-pandemic performance in data going back to 1999;
motor vehicle sales also grew by a quarter in the year-to-July.
Agriculture, up 5%+ in 1H, and entertainment/recreation gains of
10%+ are also key standouts for this year’s expansion.
Fig. 1: Household spending leading Colombian GDP gains
Contribution to % YoY GDP growth
Latest
8%
4%
0%
-4%
-8%
2023
2024
2025
Private consumption
Investment
Government consumption
Inventories/other
Net trade
Real GDP growth
Source: DANE, Scotia Wealth Management.
Solid overall growth aside, it’s important to highlight that sectors
that have recently buoyed Colombia's expansion tend to have
a high degree of informality, bringing with it lower-quality
employment and/or limited investment opportunities that could
build a firmer longer-run growth base for the economy. These
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