Colombia’s Largest Bank Sees 2027 Growth Slowing to 2.4% on Spending Cuts
COLOMBIA · ECONOMY
Key Facts
- —The country Colombia, with about 53 million people, is one of Latin America’s five largest economies. It has grown slowly since the post-pandemic rebound.
- —The background The central government deficit is expected at 7.2 percent of GDP this year. The central bank’s rate is 12 percent, and the 10 August earthquake killed at least 321 people.
- —Why now The new government plans deep spending cuts for 2027. Grupo Cibest, parent of Bancolombia, the largest bank, now puts a number on their cost to growth.
- —What happened On 23 September its economists cut their 2027 growth forecast to 2.4 percent, from 2.6 percent, and kept 2026 at 2.6 percent.
- —The numbers The spending squeeze takes 0.5 percentage points off growth. Inflation could peak near 7.3 percent in early 2027, against a 3 percent target.
- —What it means for you Peso borrowing stays expensive: Cibest sees rates at 12 percent until September 2027. It expects the peso to average about 3,330 per US dollar next year.
- —Still open The size of the spending cut, the central bank’s 30 September decision, and the outcome of new talks with the International Monetary Fund.
Colombia’s largest banking group expects the economy to slow next year as the government cuts spending to contain its deficit. Grupo Cibest now forecasts Colombia 2027 growth of 2.4 percent, down from 2.6 percent.
The revision is small, but the reason matters. The bank’s economists say the fiscal squeeze alone will take half a percentage point off growth, more than any other single factor.
What the bank changed
Grupo Cibest is the holding company of Bancolombia, Colombia’s biggest bank. Its research team, led by Laura Clavijo, presented its annual outlook, the Guía 2027, on 23 September.
The team kept its forecast of 2.6 percent growth for this year. In late June it had cut that 2026 figure to 2.6 percent, calling it close to what the economy can sustain.
For 2027 it now expects 2.4 percent. That compares with 3.5 percent annual growth in the second quarter of this year, much of it driven by state spending.
Where the drag comes from
The bank describes “opposing forces”. Better signals for private investment should add 0.3 percentage points to growth, and rebuilding after the 10 August earthquake another 0.2 points.
Against that, high interest rates subtract 0.3 points and the fiscal adjustment 0.5 points.
The earthquake also costs the state money. Relief, rebuilding and aid to households and firms will add 0.7 to 1.3 percent of GDP, Cibest estimates.
Government spending would grow 5.2 percent next year, against an estimated 9.1 percent this year. Household consumption, the main engine, would slow from 2.7 percent to 2.2 percent.
The bank blames higher inflation, costly credit, rising unemployment and slower growth in remittances, the money Colombians abroad send home. Investment is the bright spot: it would grow 4.7 percent, up from 3.5 percent this year.
Construction leads that recovery. After shrinking 1.3 percent this year, it would grow 4.3 percent in 2027, helped by housing, infrastructure and rebuilding.
That would lift investment to 17.2 percent of GDP, from an estimated 16.8 percent this year.
Prices, rates and the peso
Annual inflation was already 6.24 percent in August, speeding up again after a pause in July.
The bank raised its end-2026 forecast to 6.7 percent from 6.4 percent. That is more than twice the central bank’s 3 percent target.
It expects inflation to exceed 7 percent in the first half of 2027, peaking around 7.3 percent. The main cause is El Niño, a Pacific warming that brings drought and lifts food and electricity prices.
Inflation would then ease to 5.5 percent by December 2027. Cibest does not expect it back at the target before 2029.
The central bank, the Banco de la República, raised its rate by 0.75 points to 12 percent in June. On Cibest’s path it holds there until September 2027, then cuts to 11.5 percent by December.
Cibest now sees a stronger peso than before, averaging 3,420 per US dollar this year and 3,330 next year. High interest rates, remittances and a low risk premium support the currency, but public finances keep it volatile.
The fiscal arithmetic
The government puts its 2027 deficit at about 9.4 percent of GDP if nothing changes. Its goal of 7.4 percent needs a spending cut of 45 trillion pesos (about US$13.5 billion), or 2.2 percent of GDP.
Cibest doubts that much can be cut, because so much of the budget is rigid. It assumes a cut closer to 30 trillion pesos (about US$9.0 billion), or 1.5 percent of GDP.
That leaves a 2027 deficit of 7.9 percent of GDP, more than twice the European Union’s 3 percent ceiling. Cibest projects public debt at 65.5 percent of GDP.
Even before interest payments, the state would still spend about 3 percent of GDP more than it collects, Cibest estimates. It says spending cuts alone will not restore sound public finances.
It also calls for better tax collection and a review of tax breaks. Four days after the outlook, President Abelardo de la Espriella ordered talks with the International Monetary Fund over the fiscal crisis.
How it compares
Bloomberg Línea, a business news site, found most Colombian forecasters between 1.8 and 2.6 percent for 2027.
Corficolombiana, an investment bank, is the most cautious at 1.8 percent. Davivienda, another large bank, sees 2.3 percent, Oxford Economics 2.5 percent and Banco de Occidente 2.6 percent.
Banco de Bogotá expects 2.1 percent, though its July report predates the earthquake. Corficolombiana estimates that investment of 20 percent of GDP would lift average growth in 2027–2030 to 3.3 percent, from 2.8 percent.
Corficolombiana’s research director, César Pabón, told Bloomberg Línea that 60 to 70 percent of second-quarter growth came from government spending.
What comes next
The central bank’s board sets rates on Wednesday, 30 September.
Almost three in four analysts polled by Anif, a Bogotá think tank, expect a hold at 12 percent. Anif itself expects a rise.
The 2027 budget has cleared Congress’s economic committees but still needs both chambers’ votes. The size of any spending cut is not yet law, and the IMF talks could change the fiscal path again.
A forecast of 2.4 percent does not mean a recession. It means slower growth than this year, with most of the slowdown coming from the state tightening its belt.
Frequently Asked Questions
What is Grupo Cibest?
Grupo Cibest is the holding company of Bancolombia, Colombia’s largest bank. Its economic research team publishes widely followed forecasts for the country.
Is Colombia heading into a recession?
No forecaster cited here expects one. Estimates for 2027 range from 1.8 to 2.6 percent growth, slower than this year but still positive.
Why will interest rates stay so high?
Inflation is expected to end 2026 at 6.7 percent and top 7 percent in early 2027, well above the 3 percent target. Cibest expects the central bank to hold its rate at 12 percent until September 2027.
What does this mean for the Colombian peso?
Cibest expects the peso to average about 3,330 per US dollar in 2027, close to current levels. It warns that the fiscal situation will keep the currency volatile.
Sources: Bancolombia / Grupo Cibest economic research, Guía 2027 annual outlook (research release), 23 September 2026, El Colombiano, Bancolombia 2027 projections, 23 September 2026, Semana, Bancolombia 2027 outlook, 23 September 2026, Portafolio, growth to 2.4%, 24 September 2026, Diario Occidente, Grupo Cibest Guía 2027, 24 September 2026, La República, Grupo Cibest cuts 2027 forecast, 28 September 2026, Bloomberg Línea, 2027 forecasts compared, 25 September 2026, Semana, central bank decision preview, 26 September 2026, Portafolio, 2027 budget clears committees, 23 September 2026, Valora Analitik, IMF talks, 27 September 2026, Official representative exchange rate (TRM), 25 September 2026. Pesos converted at 3,329.61 per US dollar, Colombia’s official representative exchange rate (TRM) for Friday 25 September 2026. All retrieved 28 September 2026.
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