Key Points
— Fedesarrollo cut its 2026 GDP growth forecast from 2.9% to 2.6%, citing agricultural climate shocks and tighter monetary policy — with a downside range of 2.3% and fixed investment growing just 1.2%, held back by high interest rates, the wealth tax, and labour cost increases
— The think tank raised its year-end inflation forecast to 6.23% — up 1.32 percentage points from its previous estimate — and projects the Banco de la República will hike an additional 125 basis points to 11.50% before December. Inflation has now spent 55 consecutive months above the 3% target, and Fedesarrollo says convergence won’t occur until 2030
— The Iran war has pushed Fedesarrollo’s Brent estimate to $78.10 per barrel — 32% above the government’s $59.20 financial plan assumption — while oil production is forecast at 733,000 barrels per day, a continued decline that limits the revenue windfall despite higher prices
Colombia’s most influential economic think tank just delivered a verdict that challenges every assumption in the government’s financial plan: slower growth, higher inflation for four more years, and interest rates that aren’t coming down.
Fedesarrollo’s latest Colombia GDP forecast paints a picture of an economy caught between external shocks and domestic policy constraints. The 2026 growth projection of 2.6% — down from 2.9% — would mark the fourth consecutive year of below-potential expansion. Consumption remains the engine, forecast at 3.4%, but gross fixed capital formation is expected to grow just 1.2%, weighed down by what Fedesarrollo identifies as a toxic cocktail: higher interest rates, the emergency wealth tax, economic policy uncertainty ahead of the May 31 election, and the 23.7% minimum wage increase — among the largest in Colombian history.
The Inflation Alarm
The most striking number in the report is the inflation revision. Fedesarrollo now expects year-end inflation at 6.23% — up 1.32 percentage points from its previous estimate and more than double the Banco de la República’s 3% target. Services inflation has reached 6.45%, driven by wage indexation to the 23% minimum wage hike. Food inflation sits at 5.84%, pushed higher by adverse climate conditions and rising fertilizer prices — a dynamic our reporting has tracked as the Hormuz crisis disrupts 45% of global fertilizer trade and China halts exports.
The projection that Colombia won’t reach its 3% inflation target until 2030 is the most damaging headline for policymakers. It means four more years above target — which would bring the total streak to nearly a decade. For the central bank, this justifies continued tightening. Fedesarrollo expects an additional 125 basis points of hikes, bringing the benchmark rate to 11.50% by December — the highest since the 2022–2023 tightening cycle peak of 13.25%.
The Oil Gap
Fedesarrollo projects average Brent at $78.10 per barrel and Colombian coal at $106 per tonne — both above previous estimates, reflecting the Middle East conflict’s impact on energy markets. But there is a critical gap: the government’s 2026 financial plan assumes $59.20 per barrel, a difference of 32% that means either a revenue windfall or a planning framework built on outdated assumptions. Meanwhile, oil production is forecast to fall to 733,000 barrels per day and coal to 53.1 million tonnes, meaning higher prices won’t fully offset declining volumes.
The Political Calendar
Every number in this report lands in a political context. The May 31 presidential election means the outgoing Petro administration has no incentive to restrain spending, while candidates must promise solutions they cannot fund. Fedesarrollo expects the peso to average COP$3,900, with depreciation pressure intensifying in the second half as fiscal risks, electoral uncertainty, and geopolitics converge. For investors positioning in Colombian assets, the message is unambiguous: rates are going higher, inflation is stickier than anyone expected, and the growth upside that the Colombia economy briefly promised has been revised away.