Colombia Economy Grew 3.5% in the Second Quarter, Led by Public Spending

The Colombia economy expanded by 3.5% in the second quarter of 2026, as reported by the national statistics office DANE. Public administration was the key driver of this growth, with public spending increasing by around 10% compared to the previous year. This marked a notable acceleration from the 1.9% growth observed in the same quarter last year.

Growth on a quarterly basis reached 1.3% after accounting for seasonal and calendar effects, indicating a steady build-up of momentum throughout the first half of 2026. The strongest sector within public administration was government expenditure, which expanded by approximately 10% year-on-year. Additionally, arts, entertainment, and recreation services grew by about 9.5%.

However, other sectors such as wholesale and retail trade, transport, accommodation, and food services expanded more modestly at 2.2%. While inflation remained a concern, annual headline inflation stood at 6.03% in July 2026, with monthly inflation rising by 0.17%. The core inflation figure, excluding food and non-alcoholic drinks, was about 5.8%.

The central bank, Banco de la Republica, maintained its policy rate at 12.0% during its meeting on July 31, 2026, due to persistent inflation above the target range. This has kept borrowing costs high for consumers and businesses. Despite the strong GDP performance, the uneven growth across sectors suggests a cautious approach for investors.

Foreign investors might be attracted to Colombia's robust growth, but the high inflation rate and elevated interest rates could dampen enthusiasm. The government's fiscal policies will be crucial in sustaining this growth trajectory. While the second-quarter performance presents a positive outlook, inflation remains a significant risk for the remainder of the year. The central bank's future decisions will be pivotal in determining the economic path ahead.