Colombia Growth Seen Slower in 2027, Citi Says

Inflation is the more immediate constraint. Citi sees consumer prices ending 2026 at 6.5% and easing to 4.7% in 2027, still well above the Banco de la República’s 3% target. Ernesto Revilla, Citi’s chief Latin America economist, said Colombia has shown more persistent inflation than its Andean peers, citing indexation, earlier minimum-wage increases, food and energy pressures and the risk of El Niño disrupting prices into next year.

That persistence helps explain why Colombia’s central bank is likely to keep monetary policy restrictive for longer than some regional peers. Citi expects the policy rate to end 2026 at 12.5% and fall only to 11% by the close of 2027. High real borrowing costs would continue to restrain consumer credit, corporate investment and housing, while also increasing the government’s debt-servicing burden at a time when fiscal consolidation is already biting.

For bondholders, the message is mixed. A more disciplined fiscal stance could support medium-term creditworthiness and reduce the risk premium on Colombian assets, but the near-term path still hinges on whether inflation expectations can be pulled lower. Revilla warned that expectations can become self-reinforcing through wage talks and corporate pricing, complicating disinflation and forcing the central bank to stay cautious.

The market has also started to price in the possibility of outside support. Revilla said an IMF program has been discussed in markets, though any such arrangement would depend on political agreement and the government’s willingness to push through reforms. That matters because Colombia’s financing costs and external confidence will depend not only on growth, but on whether policymakers can anchor inflation while restoring public accounts without destabilizing activity.

The broader regional backdrop is more favorable, with Citi citing a weaker dollar, firm commodity prices and stronger investment flows as potential tailwinds for Latin America. But Colombia’s case shows why those external supports are not enough on their own: without faster inflation relief and a credible fiscal path, the economy may spend 2027 paying the price for stabilization before it can benefit from it.