Colombia will grow less in 2025: OECD lowers projection to 2.5%

The Organization for Economic Cooperation and Development (OECD) revised its growth projection for Colombia downward, from 2.7% to 2.5% this year and from 2.9% to 2.6% in 2026, levels still below those recorded before the pandemic, according to its semi-annual Outlook report, released Tuesday.

"The economy will grow at moderate rates of 2.5% in 2025 and 2.6% in 2026," after growing 1.6% year-on-year in 2024, the study noted, warning of "increasing downside risks."

These projections represent a 0.2 percentage point reduction for this year compared to the 2.7% forecast in the previous half-year report, presented on December 4, and a 0.3 percentage point reduction from the 2.9% the agency had projected for 2026.

"Investment will continue to recover from a decline below 17% of GDP, but uncertainty and the housing market slump will prevent a full return to the pre-pandemic investment rate of 21%," the study warned.

The report also indicated that consumption and exports will moderate due to the global economic slowdown and tariffs imposed by the United States, Colombia's main trading partner.

The OECD noted that almost a third of Colombian exports go to the United States, although the majority (60%) are tariff-exempt minerals and petroleum products. This results in an effective US tariff rate on Colombian imports of around 5%.

"The fall in oil prices will reduce exports and tax revenues, increasing pressure on an already tight fiscal position," the report added.

Regarding inflation, which has remained around 5.2% since November, the OECD noted that it will continue to decline, but at a slower pace than expected, as expectations for the end of 2025 rose from 3.9% in October to 4.8% in May, still above the 3% target.

Regarding the fiscal deficit, which reached 6.8% in 2024, the OECD projected that it will remain "elevated" at 6% in 2025 and 5.6% in 2026.

The agency warned that, "unless there is evidence that tax revenue significantly exceeds its current level, spending cuts of at least 0.9% of GDP will be necessary to comply with the fiscal rule."

"In the medium term, it is necessary to reduce budgetary rigidities and implement comprehensive tax reform to regain fiscal space," the organization recommended, adding that "reducing administrative burdens and improving infrastructure would help revitalize productivity and investment growth."

To alleviate the fiscal deficit and the state's cash flow problems, President Gustavo Petro's government announced last week that it would collect taxes early this year on the income that companies expect to receive in 2026.

The OECD also projected that unemployment will remain around its current level, which was 8.8% last April, and that the policy interest rate will fall to 7% by the end of 2026.