Colombian Economy: Growth in 2024 and What’s Anticipated for 2025
As we close the year 2024, the results of the Colombian economy typically generate various analyses of interest. For this reason, in the following article, we will address some of the most relevant data, such as: the Gross Domestic Product, the budget, fiscal deficit, inflation, the devaluation of the Colombian peso, unemployment, construction, real estate and tourism. These factors will allow us to make some projections for 2025. Join us in this special edition dedicated to the economy.
Despite some challenges, Colombia has once again positively surprised us. According to the prestigious British publication “The Economist”, the country ranked sixth among 32 nations with the best economic performance in 2024, surpassing even the growth of Germany, the United States, Israel, Switzerland, Sweden, and the Netherlands, among others
GDP Growth in 2024 Exceeds Expectations; Maintaining It Will Be the Challenge for 2025
According to official figures from DANE, Colombia’s “Producto Interno Bruto (PIB)” grew 2.0% in 2024, compared to the previous year, which had a marginal growth of only 0.3%.
In 2024, the activities that contributed most to GDP growth were the artistic, recreational and household activities, which increased by 9.8%, followed by the agriculture, livestock and fishing sectors, with growth of 8.9%. In third place were the services, public administration, health and education sectors, which grew by 4.2% in this period.
By 2025, the financial sector is expected to lead GDP growth at 4.6%, followed by communications (4.3%), entertainment and household services (4.0%), and construction (3.4%). Agriculture (2.8%), real estate (2.7%), and trade, transportation, and accommodation (2.6%) round out the top sectors. Professional activities (2.5%), public administration, education, and health (2.4%), taxes (2.2%), and utilities (1.7%) show moderate growth, while manufacturing (1.3%) and mining (0.3%) close the ranking. Ultimatelty, the economy is expected to continue growing and gradually stabilize in the country.
Colombia's National Budget for 2025 Requires Adjustments and Control of Government Spending and Inflation
The Colombian government has estimated a budget of $523 trillion COP for 2025, representing a 4% increase compared to 2024. This translates to approximately $9,867,924 COP per person annually or around $2,240 USD per person. However, over 61% of this budget is allocated to operating expenses, and 23% goes toward public debt payments, leaving little flexibility for the government. Additionally, the new tax reform was not approved by the National Congress, presenting another significant challenge.
Analysts predict that, under President Gustavo Petro’s administration, 2025 will be the third consecutive year of governance challenges, requiring significant financial adjustments. These adjustments will involve limiting spending to prioritize social investment and address the high levels of poverty and inequality in the country. The fiscal deficit is projected to be 5.1% of GDP in 2025.
A positive aspect is that in 2024, inflation closed at 5.5%. For 2025, the goal is to reduce it to a range of 3-4%. As a result, interest rates are expected to continue decreasing which will help maintain stability in the consumer price index and, in turn, improve both consumption and citizens’ financing capacity.
The Devaluation of the Colombian Peso is an Indicator That has 2 Important Aspects
In 2024, the Colombian peso experienced a cumulative depreciation of 14.9%, closing the “Tasa Representativa del Mercado” (TRM) on December 31 at $4,409 pesos per U.S. dollar. This reflects a weakening of the country’s currency purchasing power against the strengthening dollar.
This situation reveals two contrasting perspectives:
- On the one hand, Colombia becomes more affordable for those holding strong currencies like the U.S. dollar or the euro, boosting exports and attracting foreign investors.
- On the other hand, imports become more expensive, and the upward pressure on the dollar increases the cost of goods and services sourced from abroad.
As happens every year, in 2025, the relationship between the Colombian peso and the U.S. dollar will present both challenges and opportunities for the country’s economy. These aspects include:
(I): Persistent Devaluation Pressure:
Volatility in International Markets: Factors such as geopolitical tensions or monetary adjustments in the United States could increase demand for dollars, weakening the Colombian peso. Donald Trump returns to the White House in 2025, raising expectations around the world, with the potential to influence the global economy. In this context, Colombian President Gustavo Petro has adopted a cautious stance, as his left-leaning political orientation contrasts sharply with the policies likely to be pursued by a new U.S. administration under Trump.
Export Dynamics: In this scenario, promoting exports could drive revenue growth, enhancing Colombia’s competitiveness in international trade. However, the environmental policies of President Gustavo Petro’s administration, which aim to gradually phase out the coal, oil, and gas industries, have been criticized. This policy could lead to Colombia importing these resources in the short term.
Fiscal Deficit and Debt: Dependence on external financing to cover the fiscal deficit could pressure the currency. While devaluation might be considered as a tool to address the growing budget shortfall, such an extreme measure would likely provoke public discontent and cause more long-term issues than it resolves.
Domestic Inflation: Rising inflation and increased imports would affect the peso’s competitiveness, reducing purchasing power and exacerbating economic inequalities.
(II) Strengthening of the Colombian Peso:
Increase in commodity prices: This scenario would be beneficial for Colombia in a favorable international context. The rise in prices of key export products such as coffee, gold, crude oil, and coal could strengthen the national currency. Furthermore, the strengthening of sectors like trade, tourism, and foreign investment could increase the country’s foreign exchange earnings, contributing to economic stability.
Confidence in economic policies: If the government maintains a responsible fiscal policy and continues controlling inflation, international perception of Colombia’s economic stability would improve, potentially attracting more investment. However, in some aspects, the government has missed opportunities to capitalize on the advantages the country offers to receive greater foreign investment.
Unemployment in Colombia: A Persistent Economic Challenge
To reduce unemployment, Colombia will need to generate more wealth and create new business opportunities that generate jobs in the coming years. By 2025, the unemployment rate is estimated to range between 10% and 12% of the economically active population.
Construction, Real Estate, Tourism, and Services Could Drive Economic Growth in 2025
Colombia’s construction sector is poised for recovery in 2025 after nearly two years of significant challenges, including rising raw material costs and economic slowdown. The country faces a 31% housing unit deficit, according to Camacol, indicating strong potential demand in 2025.
This trend underscores the sector’s crucial role in economic recovery and its capacity to address housing needs in the coming year.
Additionally, home sales grew by 37.4% in 2024, with a remarkable performance in social interest housing (VIS), which accounted for 39,921 units sold. The government facilitated access to housing for Colombian families by granting more than 50,000 subsidies through the Mi Casa Ya program.
It is worth noting that, according to estimates by the specialized portal Ciencuadras, more than 140,000 new homes were sold in Colombia in 2024. Analysts believe that this positive trend could continue in 2025.
Regarding tourism, according to industry sources, in 2024, the sector contributed more than 4.5% to the GDP, with over 5 million tourists, of which 3.9 million were foreigners. This sector is of vital importance as it drives commerce, accommodation, hospitality, entertainment, transportation, restaurants, and more. This generates a 14% increase in revenue. In 2025, the challenge will be to consolidate these results.
Conclusions
-It is expected that Colombia will grow more in 2025, primarily driven by sectors such as construction, trade, tourism, and others.
-The government will face a growing deficit, so it will need to make adjustments or increase debt to meet its social goals.
-Inflation will continue to decrease, stabilizing the price index and encouraging access to credit and savings.
-The Colombian peso will continue to depreciate due to internal and external volatility.
-Reducing unemployment and labor informality remains a significant challenge for the country in 2025.
-If the government does not seek alliances with the private sector, political tensions could arise in an election year.
Questions, comments? Contact me today and I will be happy to discuss any of these issues further with you.
