Rhythmic Reasoning_Highlights_SWM_EN - Flipbook - Page 11
COLOMBIA & PERU
Colombia: Better growth against fiscal, monetary policy, and election headwinds
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.
Highly restrictive rates to continue
amid inflation risks and solid Colombian growth
16%
12%
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.
8%
4%
0%
-4%
2005 2007 2009
Peru: Solid growth to continue despite elections and fiscal retreat
Growth forecasts of around 3% for 2026 would be greater were it not for slower
government spending plans and headwinds associated with the April 2026 election.
The outcome of the vote remains difficult to call, with parties yet to define their
candidates, but we think political turbulence is at least unlikely to be worse than over
the past decade. A business-friendly presidency, in tandem with a strong metals price
backdrop, could significantly lift investment.
2013
2015
2017
BanRep nominal policy rate
2019
2021
2023
2025
BanRep real policy rate
Strong employment growth and low inflation
driving Peruvian consumption strength
Peru’s economic strength continued in 2025, only challenged by temporary shocks
such as mine closures (and mostly benefiting from the U.S.’s trade war), that are
leaving GDP on track to register ~3% growth in each of 2025 and 2026.
The economy is growing in a firm and sustainable fashion with a rising trend driven by
private investment and domestic demand, while the public sector retreats somewhat
to comply with fiscal rules. The recent approval of another round of pension funds
withdrawals should also boost personal spending into 2026.
2011
13.0%
9.0%
5.0%
1.0%
-3.0%
-7.0%
-11.0%
2016
2017
2018
2019
2020
2021
2022
2023
2024
Headline inflation (YoY % chg, 3 mth moving avg)
Formal employment (YoY % chg, 3 mth moving avg)
2025
