How Colombia Became One of the Best Economies of 2025

“The economy is much better than we think. Non-performing loans have improved considerably. People are paying more, both businesses and individuals. Consumption is increasing,” he summarized.

What’s going on? Are things really going so well in Colombia? And how long can this growth last?

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

“If we look at the growth figures, everything seems to be going well, because Colombia is growing very close to its potential, of 3%,” Nicolás Barone, Deloitte analyst for the Andean region, told BBC News Mundo, the BBC’s Spanish-language news service.

“Private consumption recorded a positive reaction after a slightly weaker performance in previous years,” explains Ocampo.

Employment also shows positive figures.

The unemployment rate stands at 8.2%, the lowest level in history. “It’s a more than good figure for Colombia,” said Barone.

Ocampo points out that “informality remains very high, but if we look at employment growth this year, we see that three-quarters of this expansion is in formal jobs.”

Although Donald Trump’s return to the presidency of the United States and his differences with Colombian President Gustavo Petro have led to fears that Colombia could be one of the countries most affected by the tariffs, this has not been confirmed.

The country was subject to the 10% general tariff established for exports to the United States, applied to most Latin American countries, and also benefited from rising coffee prices.

“The agricultural sector is doing well and employs a significant number of people,” says Barone.

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

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

The devaluation of the dollar — resulting, among other factors, from doubts related to the increase in American public debt and the reduction of interest rates by the Fed (the American Central Bank) — has increased the relative value of several Latin American currencies, including the Colombian peso.

For Colombia, the effects are ambivalent.

“The agricultural sector is experiencing difficulties because it receives less money for its exports, but this could also have a stimulating effect on the importing sectors,” explains Barone.

But it’s not all good news.

“When we look at the causes of this growth in activity, warning signs appear, because one of the factors driving it is unsustainable public spending,” explains Marc Hoffstetter, from the University of the Andes (Colombia).

“Foreign investment figures have been completely depressed for several years, raising serious doubts about our ability to maintain this growth rate.”

Hoffstetter and other economists believe that the increase in private consumption could be linked, to a large extent, to the high volume of public employment.

This situation, according to them, could be affected as the process of adjusting public accounts, considered urgent by many analysts, progresses.

The most recent estimates indicate that Colombia’s public accounts are expected to close 2025 with a deficit of around 6.2% of GDP, a level that worries experts and authorities.

For comparison, the Independent Fiscal Institution (IFI) of the Brazilian Senate estimates that Brazil will end this year with a deficit of 0.6% of GDP.

To correct the deficit by increasing revenues, the government of Gustavo Petro presented a tax increase proposal which was rejected by Congress. Before that, he had already activated the constitutional clause which allows him to suspend the budgetary rule controlling public spending.

Ocampo warns that “the budget deficit generated by the increase in public spending is the most serious problem and, in fact, the government has not faced it.”

The Bank of the Republic, Colombia’s central bank, has warned that the high deficit accumulated over the past two years could contribute to rising prices and undermine public debt reduction goals.

Another negative point of the Colombian economy has been the contraction of activity and the drop in investments in the mining and oil sectors. The latter was affected both by the fall in international oil prices and by the increase in taxes on hydrocarbons promoted by Petro.

Inflation, whose reduction is showing signs of running out of steam, is another of the challenges still awaiting the Colombian economy.

Some voices have warned of a possible catastrophic effect on the economy with the coming to power of Gustavo Petro, the first left-wing president in Colombia’s recent history.

But these figures do not indicate a collapse of Colombia’s economy since Petro assumed the presidency in 2022.

Over the past two years, it has followed a “moderately positive” trajectory, according to consulting firm Deloitte.

Petro has launched high-profile projects, such as labor reform, which includes wage improvements for formal workers and higher charges for businesses.

Approved in June 2025, after a tortuous process in Congress, during which the initial text was considerably reduced, the new law has only been in force for a short time, making it difficult to assess its effects.

Critics say the measure could harm the economy by raising labor costs for employers and point out that it does not benefit the country’s informal workers, who make up the majority of the workforce.

But for the government, “it is a reform which not only protects workers, but which also contributes to the consolidation of the country’s productive apparatus”, according to the Minister of Labor, Antonio Sanguino.

Petro failed to get Congress to approve several of his tax reforms, proposals with which he intended to increase state revenues and resources and which could have had a significant impact on the economy.

In practice, although the economy did not suffer the collapse some predicted with Petro’s rise to power, economists do not give the president credit for the good timing.

Barone said that “the foundations were laid much earlier and the Colombian economy was already performing well before the pandemic. Although it needed some stimulus, investments were performing well.”

The expert believes that the arrival of Petro “has sparked fear among the business world and over the last two years investments have declined significantly.”

The future of Colombia will be decided, to a large extent, in the elections to which Colombians will be called in May 2026.

Whoever is chosen to succeed Petro, the new president will face the challenge of reducing the budget deficit and balancing the books.

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

The extent of spending cuts and their potential impact on civil servants will be one of the first uncomfortable questions Colombia’s next president will have to face.

Barone believes that adjustments can be “gradual” and that, for now, “drastic measures” are not necessary.

“We are in a moment of first alert,” summarizes the expert.

If it corrects the budget deficit and maintains market confidence, Colombia will be able to continue the growth trajectory of recent years, which has allowed it to reduce informality and inequality, two of its main structural problems.

Ocampo believes that the country has benefited from the fact that in recent years it has become clear that “in Colombia the institutions work. There is a separation of powers and, in that sense, we are more like Peru.”

“The outlook for Colombia in 2026 is one of cautious optimism,” Barone concludes.

With information from José Carlos Cueto. Graphics by Laís Alegretti, from the visual journalism team at BBC News Brasil