Colombia's economy exceeded the most optimistic forecasts.

Colombia's Gross Domestic Product grew by 3.6% in the third quarter of 2025, its largest expansion since the end of the pandemic, well above the forecasts of most economists. Those surveyed by Bloomberg expected no more than 3.2% growth. And according to the British weekly "The Economist," Colombia's economy was projected to be the best performing in all of Latin America in 2025 and the fourth best performing in the world. According to Jose Antonio Ocampo, former Minister of Agriculture and Finance and professor at Columbia University in the United States, "the economy is going to grow more than expected, even by the most optimistic, due to increased public consumption, but also private consumption." Juan Carlos Mora, president of Bancolombia, one of the country's main banks, explained how his institution perceives the current situation: "The economy is doing much better than people think. Non-performing loans have improved substantially. People are paying better, both companies and individuals. Consumption is growing," he summarized. What's going on? Are things really going so well in Colombia? How long can the boom last?

What's working in the Colombian economy

The rebound in growth after the end of the pandemic accelerated in the last year.

“If we look at the growth figures, everything seems to be going well, since Colombia is growing very close to its potential of 3%,” Nicolas Barone, Deloitte analyst for the Andean Region, told BBC Mundo.

“Private consumption has registered a positive reaction after somewhat weaker performance in previous years,” former minister Ocampo explained to BBC Mundo.

Employment also shows positive figures.

The unemployment rate is at 8.2%, a historic low. “It's a more than good number for Colombia,” Barone believes.

Ocampo points out that “informality remains very high,But when you look at job growth this year, you see that three-quarters of the growth has been formal employment.”

Although Donald Trump's return to the White House and his differences with Colombian President Gustavo Petro raised fears that Colombia would be one of the countries hardest hit by his tariffs, this has not been the case.

The country has been subject to the general 10% tariff established for exports to the United States from most Latin American countries and has benefited from the rise in coffee prices.

“The agricultural sector has done well and employs quite a few people,” Barone says.

Illicit crops like coca may have had a stimulating effect on the economy, although this is more difficult to measure due to the lack of official figures.

The last few months have also been marked by the appreciation of the peso against the dollar.

The devaluation of the dollar, due among other Factors such as the doubts stemming from the increase in US public debt and the reduction in interest rates by the Federal Reserve have raised the relative value of several Latin American currencies, including the Colombian peso. For Colombia, this has ambivalent effects. "The agricultural sector is suffering, receiving fewer pesos for its exports, but we could also see a stimulating effect in importing sectors," explains Barone. The problems of the Colombian economy: But it's not all good news. "If you break down what's behind this growth in activity, warning signs appear, because one of the factors driving it is unsustainable public spending," Marc Hoffstetter of the University of Los Andes told BBC Mundo. "Foreign investment figures have been completely depressed for several years, which raises serious doubts about whether we can maintain this growth."

Hoffstetter and other economists believe that the increase in private consumption may be largely due to the high volume of public sector employment, and this could be affected when the task of balancing the public accounts, which many consider urgent, is undertaken.

The latest estimates indicate that Colombian public accounts will close 2025 with a deficit of around 6.2%, a level that worries experts and authorities.

To correct the deficit by increasing revenue, the Petro government promoted a tax increase that was rejected by Congress. It had previously activated the constitutional clause that allows it to suspend the fiscal rule on public spending.

Ocampo warns that “the fiscal deficit generated by the increase in public spending is the most serious problem and has not really been addressed by the government.”

The Central Bank has warned that the high deficit that has accumulated in the last two years could contribute to rising prices and compromises the objectives of reducing public debt.

Another of the dark spots in the Colombian economy has been the reduction in activity and the decline in investment in the mining and oil sectors, the latter affected by the fall in international crude oil prices and the increases in hydrocarbon taxes promoted by Petro.

Inflation, whose reduction shows signs of having stalled, is another of the pending challenges for the Colombian economy.

What is the responsibility of Petro's government?

Some voices warned of a possible catastrophic effect on the economy from the arrival to power of Gustavo Petro, the first leftist president in the recent history of Colombia.

But the numbers don't show a collapse of Colombia's economy since Petro took office in 2022.

In the last two years, it has followed a "moderately positive" trajectory, according to the consulting firm Deloitte.

Petro has launched far-reaching projects, such as the labor reform, which entails wage increases for formal workers and greater burdens for companies.

Finally approved in June 2025 after a tortuous journey through Congress in which the initial bill was substantially cut, the new law has only been in effect for a short time, making it difficult to assess its effects.

Its detractors believe it will harm economic activity by raising labor costs for employers and emphasize that it will not benefit the country's informal workers, who are the majority.

But for the government, "it is a reform that not only protects workers but also contributes to the consolidation of the country's productive apparatus," as stated The Minister of Labor, Antonio Sanguino.

Petro has not managed to get Congress to approve several of his tax reforms, proposals with which he intended to increase revenue and state resources, and which could have had a significant impact on the economy.

In reality, although the economy has not suffered the collapse that some predicted with Petro, economists do not believe that the president can take credit for the current positive situation.

Barone stated that “the foundations were laid long before, and even before the pandemic, the Colombian economy was performing well. Although it needed some boosts, investment was behaving well.”

The expert believes that Petro's arrival “generated fear among the business community, and in the last two years investment has contracted considerably.”

What might happen from now on?

Colombia's future will be largely decided at the ballot box, which Colombians are called to in May.

Whoever is elected to succeed Petro, the new president will face the challenge of reducing the fiscal deficit and balancing the accounts.

“The elected government will have a complex task because it will have to make adjustments,” Ocampo indicates.

The scope of the spending cuts and their potential impact on public employees will be one of the first uncomfortable issues waiting on the next Colombian president's desk.

Barone believes that the adjustments can be “gradual” and that “drastic measures” are not yet required.

“We are at a moment of early warning,” he summarizes. expert.

If it corrects the fiscal deficit and doesn't lose market confidence, then Colombia could stay on the growth path it has followed in recent years, which has allowed it to reduce informality and inequality, two of its main structural problems.