Economic Projections

The government set a 23% increase in the minimum wage for 2026, an unprecedented figure that threatens to push inflation up to 6% and force the Central Bank to raise rates. Faced with the collapse of the tax system, Petro declared an economic emergency to raise taxes, a measure rejected by mayors and governors before the Constitutional Court. At the regional level, Maduro’s removal by the US weakened the official narrative and gave new impetus to the center-right.

Colombia ends the year with a record fiscal deficit of 2.9%, the highest in three decades, driving 3% growth but anchoring inflation at over 5%. In Congress, the government suffered a double blow with the collapse of tax and health reforms, forcing it to cut the 2026 budget. While pension reform remains in the hands of an associate judge, the electoral landscape is fragmented: Paloma Valencia will be the Democratic Center’s candidate, dividing the right wing against De la Espriella.

GDP grew by a surprising 3.6% in the third quarter, driven by public spending (15%) and consumption, although weak investment (2%) is raising alarms about future growth. Politically, the ruling party flexed its muscles with 2.7 million votes in its primary, consolidating Iván Cepeda as the leader of the left. Following the end of the restrictions imposed by Law 2494, the first polls place Abelardo de la Espriella and Cepeda as the frontrunners, with Sergio Fajardo lagging behind.

Bilateral relations with the US collapsed after Trump suspended economic aid and levelled accusations against Petro. Domestically, the 2026 budget is underfunded, while the debate over a minimum wage increase (10-12%) divides the Central Bank. Politically, Daniel Quintero’s withdrawal from the Pacto Histórico consultation highlights fractures within the ruling party, leaving Petro’s electoral strength in a vulnerable position.

The economy rebounded in July with growth of 4.1%, although inflation stuck at around 5% and announcements of wage increases for 2026 prevented monetary policy from being loosened. Politically, the government suffered a setback in the Senate with the election of Carlos Camargo to the Constitutional Court, anticipating the collapse of the tax reform. In addition, the US decertified Colombia due to the rise in drug crops, although it granted a waiver to maintain aid on a conditional basis.

Second quarter GDP (2.1%) disappointed expectations, although durable goods consumption and consumer confidence reached positive levels after five years. Politically, the death of Miguel Uribe Turbay reshaped the opposition, which is now looking for heirs such as Juan Carlos Pinzón or the leader’s own father, Miguel Uribe Londoño. Meanwhile, in the Historic Pact, Petro’s closeness to Daniel Quintero is causing friction with the grassroots, who prefer Gustavo Bolívar.

The Colombian peso appreciated to $4,000, driven by the global weakness of the dollar and high local rates, allowing inflation to fall to 4.8% after three years of resistance. Politically, the passage of Law 2494 of 2025 imposes severe restrictions and high costs on public polls, limiting their dissemination until the end of the year. This measure creates information asymmetry and electoral uncertainty, making it difficult to gauge public opinion and for investors to make decisions ahead of 2026.

The economy surprises with a projected GDP of 3.1% and historic unemployment of 8.8%, although demand keeps inflation stagnant at 5%. While the market already discounts fiscal disorder, the government scores a victory with the resurrection of labor reform, offsetting the slowdown in pension reform. However, the attack on Miguel Uribe Turbay catalyzed a massive opposition march, wresting control of social mobilization from the executive branch ahead of 2026.

The economy is showing signs of decoupling: while informality is driving employment (759,000 new informal jobs compared to 212,000 formal jobs), tax collection is at risk due to stagnation in key sectors. Politically, Congress’ rejection of the labor reform referendum allows the government to adopt a narrative of “the people against institutions.” Petro is now betting on civil mobilization to regain legitimacy and position his pieces for 2026.

Debt climbed to 60.6% of GDP, requiring an adjustment of $11 trillion that the new minister, Germán Ávila, seeks to cover by raising withholdings and anticipating 2026 revenues, a measure that provides breathing room for the current administration but mortgages the next government. Politically, following the departure of Diego Guevara due to fiscal disagreements, the executive branch submitted the referendum to the Senate, a highly complex technical gamble that seeks to mobilize the left ahead of the 2026 elections.

Inflation rises to 4.3% driven by tolls and wages, while fiscal credibility plummets after implausible revenue targets are revealed, anticipating non-compliance with the rule in 2025. Politically, the collapse of labor reform fractured the relationship with Congress, leading the government to propose an unfeasible referendum. This maneuver is interpreted as an electoral strategy by the left for 2026 in the face of declining public spending.