Colombia's Economy Is Growing. The Fine Print Matters.

Colombia's GDP grew 3.6% year-on-year in Q3 2025 — and 2.1% quarter-on-quarter — according to the country's national statistics agency, DANE. That beat analyst consensus forecasts.

But the details tell a different story.

What's Actually Driving Growth

The engine is domestic consumption. Private consumption rose 1.3% quarter-on-quarter, according to analysts at Capital Economics. Government consumption grew at a similar pace.

The biggest sector contributors to value-added growth in Q3, per DANE: public administration and services at 8%, wholesale and retail trade at 5.6%, and manufacturing at 4.1%.

Public administration is the top contributor. The government of President Gustavo Petro has been ramping up public spending — and a 2026 general election is coming.

On the losing end: mining and quarrying dropped 5.7%. Construction fell 1.5%. Colombia's resource sector is contracting, and the construction slump signals weak investment in productive capacity, according to Deloitte's October 2025 economic outlook.

The Trade Deficit Is a Quiet Time Bomb

Strong domestic demand is pulling in a flood of imports.

Imports surged 2.4% quarter-on-quarter and 10% year-on-year in Q3, according to Capital Economics. Export growth did not keep pace.

The result: Colombia's current account deficit widened in Q3. That puts downward pressure on the Colombian peso. A weaker peso makes imports more expensive, which feeds inflation — the exact problem the central bank is already struggling to contain.

Capital Economics flagged it directly as a "downside risk to the Colombian peso."

Inflation Is Still a Problem

Inflation hit 5.10% in 2025, according to Devdiscourse, citing Colombia's finance ministry. The central bank's target is 3%.

The finance ministry's own draft budget proposal to Congress, released in April 2026, projects inflation of 4.8% in 2027 — still above target. Deloitte's analysts noted renewed pressure in food prices specifically, complicating the central bank's path forward.

The central bank is not in a position to cut rates. Capital Economics analysts said interest rates are "likely to remain unchanged at 9.25% until at least the second quarter" of 2026. That's restrictive monetary policy grinding on businesses and borrowers.

The finance ministry is projecting 3% GDP growth for 2027. The central bank is projecting 1.6% for the same period. That's a significant divergence — and someone is going to be wrong.

The Political Angle

Gustavo Petro is Colombia's first left-wing president. He's heading into a 2026 general election cycle with a GDP number he can promote.

As ICIS reported, Petro now has a political argument that "the left is able to manage a successful market economy." He's pointing to the strong GDP as vindication for policies like higher pension provisions for lower-paid workers and a plastic tax in the petrochemicals sector.

That argument has surface-level merit — the economy IS growing. The public spending surge that pushed public administration to the top growth contributor, however, looks an awful lot like election-year stimulus. Governments across the political spectrum do this.

Spending your way to a good GDP number before voters go to the polls is standard practice. It doesn't necessarily mean the fundamentals are strong.

What Mainstream Coverage Is Getting Wrong

Most coverage leads with "beats expectations" and stops there.

The current account deficit widening, the mining sector contraction, the construction slump, the government spending surge — these are all in the data. They're just not in the headline.

Deloitte's analysts described Colombia's recovery as "gradual" and "uneven," with the construction and housing sectors specifically "constrained by structural and regulatory headwinds." Parts of the economy are still stuck.

The finance ministry and the central bank are not on the same page about where this economy is going. A 3% growth forecast versus a 1.6% forecast is not a rounding error. That's a fundamental disagreement about the trajectory of the Colombian economy.

What This Means for Regular People

For Colombians: your economy is growing faster than most of Latin America, but your cost of living is still rising faster than the central bank wants. Borrowing remains expensive at 9.25% rates. Jobs are improving but informality is still widespread, per Deloitte.

For outside observers: Colombia is a real test case for left-wing economic governance in Latin America. The results so far are mixed — not a disaster, not a triumph. A government that's spending aggressively into an election, with a trade deficit widening and inflation stubbornly above target, warrants careful monitoring.

The number was good. The story behind the number is more complicated.