Colombia's economy grew 3.6% in the third quarter, mainly driven by public spending, raising concerns about fiscal sustainability and inflation impacts. Analysts note that the public sector contributed nearly half of the GDP growth, with an 8% rise in administration, defense, education, and health.
Colombia's economic growth in the third quarter reached 3.6%, viewed positively but originating largely from heightened public spending, which has sparked concerns among experts and officials. This boost stems mainly from the public sector, which grew by 8%, accounting for about half of the GDP increase. Key drivers include raises in premiums for uniformed personnel, reactivation of procedures in bodies like the Registraduría, and delayed salary adjustments.
By September, the Central National Government's spending stood at 18.4% of GDP, one percentage point higher than the previous year, while primary spending hit 14.9% of GDP, exceeding both 2024 levels and recent averages. Although debt management operations yielded notable savings—a debt balance reduction of $21.6 trillion and a drop in interest costs of $26.2 trillion, per the Autonomous Fiscal Rule Committee (Carf)—these funds went toward additional spending rather than deficit reduction.
Consequently, the overall fiscal deficit reached -5.4% of GDP in September, the highest for that month since the pandemic. Foreign direct investment is at historic lows, at just 16% of GDP, though Colombia's GDP growth ranks among the highest in the OECD.
The chief risk lies in effects on inflation, which showed an annual variation of 5.51% in October, far from the 3% target. This demand push could hinder a return to low price levels, according to analysts.