A staff team from Washington, D.C., has been engaging with Colombian authorities as part of the 2025 Article IV consultation, with visits to Bogotá occurring in February and early April. The following statement was issued today by Ms. Oner and Mr. Ding.
The Colombian economy has continued to grow, though some key imbalances have moderated. After a sharp slowdown in 2023, the economy expanded by 1.7 percent in 2024, supported by private consumption, a robust labor market, and a gradual recovery in investment. Headline inflation resumed its downward trend in March, reaching 5.1 percent year-on-year, influenced by a tight monetary policy. The current account deficit further narrowed to 1.8 percent of GDP in 2024, buoyed by strong tourism and remittances inflows. Despite net portfolio outflows, the deficit was financed with net foreign direct investment inflows. International reserves remain stable, rising to 130 percent of the ARA by the end of March, aided by last year's reserve accumulation program. The banking system remains stable, characterized by liquidity, adequate capitalization, and provisioning, with robust oversight.
However, public deficits and debt levels have exceeded expectations. The central government's overall fiscal deficit increased to 6.7 percent of GDP in 2024, up from 4.2 percent of GDP in 2023, which is 1.1 percentage points above the authorities' medium-term fiscal target. This higher deficit resulted from lower-than-expected tax revenues and higher primary expenditures, despite spending adjustments made in late 2024. Liquidity constraints led to the accumulation of significant budgetary backlogs (2.8 percent of GDP) that are being addressed this year, competing with 2025 budget resources. These higher deficits, combined with a somewhat weaker peso, resulted in gross public debt reaching 61.3 percent at the end of 2024. Consequently, Colombian spreads have risen, particularly in comparison to peers, affected by tighter global financial conditions.
Amid elevated and shifting global risks, the Article IV consultation continues to focus on the economic outlook and policies to mitigate potential shocks while decisively strengthening public finances.
The Article IV consultation will persist in the near future. "We thank the authorities for the open and constructive dialogue, and we look forward to maintaining our close engagement, including in the margins of the IMF-World Bank Spring Meetings in late-April in Washington, DC," stated Ms. Oner and Mr. Ding.