Economic growth decelerates in the fourth quarter of 2025

Q4 GDP reading disappoints markets: Colombia's GDP grew 2.3% in annual terms in Q4, following a 3.6% expansion in the prior quarter, undershooting market estimates. On a seasonally adjusted quarter-on-quarter basis, the economy expanded 0.1% in Q4, following 1.3% growth in the prior quarter. In 2025 as a whole, the economy grew 2.6% (2024: +1.5%), posting the best result in three years.

Decline in fixed investment weighs on GDP growth: Relative to the previous quarter's data, readings in Q4 worsened for private consumption (+3.1% in annual terms vs +4.1% in Q3), government consumption (+5.9% vs +15.0% in Q3), fixed investment (-2.9% vs +5.0% in Q3), exports of goods and services (+1.2% vs +2.7% in Q3) and imports of goods and services (+1.4% vs +9.9% in Q3). Fixed investment led the slowdown, as construction activity fell. At the same time, growing concern about Colombia’s fiscal stability likely soured investor sentiment, adding to the downward pressure. Domestic consumption also lost steam, as higher inflation in the fourth quarter squeezed household budgets and weighed on spending in turn.

Minimum wage hike to boost growth in Q1: GDP growth will edge up in H1 on minimum wage hike. However, it should then lose steam in the second half of the year as the minimum wage hike stokes inflation and forces the Central Bank to hike rates. Looking further ahead, in 2026 as a whole, downside risks stem from political turbulence ahead of May’s presidential elections and mounting concerns over fiscal stability; Colombia is forecast to record one of the widest fiscal deficits in Latin America this year.

Panelist insight: Commenting on the outlook, analysts at BBVA stated: “The electoral cycle and associated uncertainty could delay private investment decisions, both in machinery and equipment and in construction, maintaining a cautious tilt to the balance of risks. In addition, public spending tends to remain elevated during electoral periods, providing an additional support to growth in 2026.”

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