Colombia’s gross domestic product expanded 2.2% in the first quarter of 2026 compared to the same period of 2025, surpassing prevailing market estimates, according to data released May 16 by the Departamento Administrativo Nacional de Estadística (DANE) and presented by the Ministerio de Comercio, Industria y Turismo. The results reflected positive performance across production, industry, and domestic commerce.

The manufacturing sector was among the quarter’s strongest contributors, posting year-over-year growth of 2.9% and adding 0.3 percentage points to the annual variation in GDP. The sector’s performance placed it among the primary drivers of national economic output for the period.

Within manufacturing, two subsectors recorded particularly pronounced gains. Motor vehicle production expanded 27.8% year-over-year, while metallurgy grew 6.6%. Both categories function as inputs to broader industrial supply chains, and their recovery carries implications for upstream and downstream productive linkages, including employment in skilled manufacturing roles.

“What is notable about the first-quarter results is not solely the magnitude of the growth, but its composition. The performance of sectors such as motor vehicles, metallurgy, and machinery is particularly significant because it demonstrates a recovery of industrial capacities with greater effects on productive linkages, skilled employment, and economic sophistication.” — Diana Marcela Morales Rojas, Minister of Commerce, Industry, and Tourism of Colombia

Separate monthly data from statistical agency DANE’s índice de producción industrial (IPI) showed that real industrial output grew 3.9% in March 2026 compared to March 2025. The expansion was distributed across multiple subsectors, including motor vehicles, metallurgy, machinery and equipment, chemicals, pharmaceuticals, rubber, plastics, and non-metallic minerals, indicating that the manufacturing recovery was not concentrated in a single production category.

Wholesale and retail trade expanded 6.0% in the first quarter, reflecting increased domestic market activity and business commerce. The trade sector’s performance complemented the manufacturing gains and contributed to the overall breadth of the quarter’s expansion.

Not all sectors contributed positively. Construction contracted 5.4% compared to the first quarter of 2025, the weakest result among major economic categories for the period. Public administration, defense, social security, education, and health services grew 5.7%, and reporting by Colombian media citing DANE data indicated that public spending accounted for approximately 46% of total first-quarter growth — a concentration that introduces a structural caveat to the headline figure, as private-sector momentum remains uneven across the economy.

Diana Marcela Morales Rojas, minister of the Ministerio de Comercio, Industria y Turismo, addressed the composition of the results in a statement issued alongside the data release. “What is notable about the first-quarter results is not solely the magnitude of the growth, but its composition,” she said. “The recovery of manufacturing, metallurgical, and industrial production activities demonstrates a greater role for sectors associated with transformation, productive capacity, and value-added generation within the national economic dynamic. The performance of sectors such as motor vehicles, metallurgy, and machinery is particularly significant because it demonstrates a recovery of industrial capacities with greater effects on productive linkages, skilled employment, and economic sophistication. These are meaningful indicators of strengthening of the manufacturing structure and national production.”

The first-quarter data were released as Colombia continues to manage elevated monetary policy rates and fiscal pressures that have weighed on investment activity in recent quarters. The Ministerio de Comercio, Industria y Turismo indicated that the quarter’s results reflect progress on an agenda oriented toward strengthening industry, domestic production, and commercial activity, though the degree to which private-sector industrial recovery can sustain these gains independently of public spending remains a key variable for subsequent quarters.

Headline photo credit: Tecnoglass

Central bank hike aims to stabilize inflation amid global volatility.

The upcoming monetary policy meeting of the Banco de la República, scheduled for April 30, takes place as the balance of financial risks has shifted significantly compared to the first quarter of 2026. Analysts from Bancolombia (NYSE: CIB) expect the Junta Directiva to increase the benchmark interest rate by 75 basis points, bringing the policy rate to 12.00%.

The convergence of elevated inflation, recent reversal episodes, and misaligned market expectations has reinforced the perceived need for a restrictive monetary stance. This strategy aims to contain domestic demand while preserving the institutional credibility of the central bank. Unlike previous sessions, the current decision-making process is influenced by a shifting global environment where markets have moved toward a higher-for-longer interest rate scenario amid increased uncertainty.

Recent discussions regarding the participation of the Ministro de Hacienda in the Junta Directiva sessions have introduced an additional element of analysis. However, current assessments suggest this does not alter the fundamental policy diagnosis, and no disruptions to the decision-making process are anticipated. Monetary policy is expected to maintain consistency, with the strategic focus shifting from reaching a contractive level to determining the necessary duration of that posture.

Analysts project Banco de la República will raise rates to 12.00% to combat inflation despite slowing domestic economic growth.

The international economic context provides a mixed backdrop for the Colombian decision. Private sector activity in the US appeared to accelerate in April, following a 1.7% monthly increase in retail sales during March. In contrast, the Eurozone reported a contraction in economic activity during April. Energy markets have also seen volatility, with US crude inventories rising in the second week of April while gasoline stocks saw a significant decline. Furthermore, crude prices surged following reports of new security incidents in the Strait of Hormuz.

Domestically, the Departamento Administrativo Nacional de Estadística reported that the Índice de Seguimiento a la Economía grew by 1.6% in February. While imports maintained growth during the same month, the urban unemployment rate across the 13 primary metropolitan areas continued a downward trend through March 2026. In the fixed income market, the central government reported debt levels at 64.2% of GDP for the first quarter, with internal debt accounting for 71.2% of that total.

Market movements reflected these broader trends as the US Treasury curve saw valuation increases driven by investor caution. In the region, Colombia, Brazil, and Uruguay emerged as the primary beneficiaries of the J.P. Morgan (NYSE: JPM) GBI index rebalancing in March. Locally, fixed-rate Títulos de Tesorería experienced devaluations across the entire curve last week. According to the April Encuesta de Opinión Financiera, these devaluations are expected to persist in the coming months. In currency markets, the COP appreciated last week against a backdrop of global and local factors, while the Euro lost ground against the USD.

Headline photo: Bogotá headquarters of Banco de la República (Banrepublica). Photo credit Juan Enrique Rodríguez, courtesy Banrepublica

Activity cools to 2.1% annual expansion.

Economic activity in Colombia expanded at an estimated annual rate of 2.1% during the first quarter of 2026. According to the latest NowCast report issued by the Grupo Cibest, unit of Bancolombia (NYSE: CIB, BVC: BCOLOMBIA), this outcome reflects a loss of momentum compared to the rolling quarter ended in February. That previous period recorded a growth of 2.2%, which was revised downward by 10 basis points from an initial estimate of 2.3%.

The 2.1% growth rate for the quarter indicates a slowdown relative to both the market consensus average of 2.7% and the internal growth forecast of 3.3% held by the bank. On a month-over-month basis, the seasonally adjusted series of the NowCast index posted a 1.3% contraction in March 2026. When compared to March 2025, economic activity grew by 2% year over year, representing a 50-basis-point decline from the 2.5% reading recorded the previous month.

“Overall, these results suggest that the economy is beginning to lose steam, amid multiple sources of uncertainty.” — NowCast Bancolombia Report

Analysis at the sector level reveals a broadly weaker growth profile, with deceleration appearing across most productive areas. Slower momentum was identified in trade, manufacturing, recreation, real estate, and financial services. Manufacturing expansion cooled to 1.0% in March 2026, while financial services recorded marginal growth of 0.6%. The real estate sector maintained a steady growth rate of 1.9%.

Construction and communications were the only sectors to record negative growth during the period. The construction sector saw a significant downturn, contracting by 2.3% in March 2026 after having posted 1.4% growth in February. The information and communications sector contracted by 0.4%, marking its fourth consecutive month in contractionary territory. Conversely, acceleration was noted in public administration, which grew by 5.1%, agriculture at 3.7%, and mining at 0.8%.

The NowCast family of indicators is prepared by Grupo Cibest through the processing and aggregation of transaction data from the bank’s various payment channels. Using advanced quantitative tools, the index provides high-frequency estimates of Colombian productive activity to complement official data from the Departamento Administrativo Nacional de Estadística. The report was authored by Arturo Yesid González Peña, Head of Quantitative and Analytics, and Sebastián Ospina Cuartas, Data Controller.

The report also incorporates data from the Bloomberg platform and FocusEconomics Consensus Forecasts to provide broader economic context. While the national economy remains in expansionary territory, the analysts suggest that the current results indicate the market is losing steam due to various sources of domestic uncertainty.

The bank’s analysts say that the increase still doesn’t include the effects of Gustavo Petro’s 23% decreed increase in the country’s legal minimum wage.

According to a report by the Economic, Industry & Market Research Area of Bancolombia (BVC: BCOLOMBIA, NYSE: CIB), annual inflation in Colombia rose by 25 basis points to 5.35% in January 2026. This monthly increase of 1.18% represents the highest inflation level since October 2025.

The data, originally prepared by the National Administrative Department of Statistics (DANE), indicates that 70% of the January inflation print was concentrated in the services and regulated components. These two sectors contributed 83 basis points of the total 118-point monthly increase, largely driven by the initial stages of annual cost pass-throughs associated with high indexation.

Businesses should prepare for more intense inflationary pressures in February and March 2026 as the full impact of the minimum wage increase and renegotiated supplier contracts take effect.

Sectoral Impacts and Service Acceleration

Annual inflation in the services category accelerated by 40 basis points to reach 6.33% in January, its highest level since April 2025. The monthly variation of 1.18% in this sector was nearly double the historical January average of 0.63%.

Bancolombia analysts attribute this acceleration to early adjustments linked to the 23% minimum wage increase for 2026 and indexation to previous years’ inflation. Notable increases were observed in:

• Full-service restaurant meals: 3.36%
• Prepared meals consumed outside the home: 2.38%
• Domestic services: 5.16%
• Imputed rent: 0.43%

The regulated group also saw an acceleration, with annual inflation rising to 5.47% from 5.40%. This was primarily explained by adjustments in urban transportation, vehicle fuels, natural gas, and tolls.

Food and Goods Price Momentum

Annual food inflation edged up slightly to 5.10% from 5.06%. Perishable foods saw an acceleration to 4.69% due to seasonal and supply factors affecting products such as tomatoes, potatoes, and plantains. Processed foods, including beef, milk, and poultry, reflected early-year cost pass-throughs, though annual inflation in this sub-group eased to 5.23%.

The goods category reached its highest level since March 2024, at 2.93%. Price hikes in this segment were driven by new taxes on alcoholic beverages enacted under the economic emergency, as well as pharmaceutical products. Conversely, price declines were noted in personal hygiene products, vehicles, and appliances, benefiting from the recent appreciation of the exchange rate.

Monetary Policy Implications and Forecasts

The Central Bank of Colombia (Banco de la República) faces continued challenges in converging toward its 2% to 4% target range. Core inflation, excluding food and regulated items, reached its highest level since November 2024, indicating persistent upward pressure.

Bancolombia forecasts that year-end inflation will reach 6.4%. The analysts suggest that the full impact of the minimum wage increase has not yet been reflected in consumer prices, as many firms are still operating with inventories purchased at previous cost levels.

Consequently, the Central Bank is expected to continue raising its monetary policy rate to anchor inflation expectations. Bancolombia anticipates the policy rate could rise to 11%, noting that the challenging outlook introduces a hawkish bias to future decisions.

Photo courtesy Bancolombia

Welcome to the weekend one and all. A week dominated, or at least that was the perception, by politics. Who will be standing in which primary and who will choose / have to go direct to Round 1 in May. Aside from that, the debate over the impact of the 23% minimum wage increase, continues.

1. How was January inflation from Departamento Administrativo Nacional de Estadística – DANE Colombia ?

2. Is the full impact of the Minimum Wage increase now baked in according to Bancolombia ?

3. How were Exports for December from Departamento Administrativo Nacional de Estadística – DANE Colombia ?

4. How many Presidential candidates do we expect to see on the ballot in May ?

5. Why is Petro again discussing Emergency Economic powers ?

6. What are FENALCO & ANDI – Asociación Nacional de Empresarios de Colombia saying about vehicle sales in 2026 ?

7. How have the markets been this week ?

That is our lot for this weekend. Wherever you are, please have a relaxing and peaceful day.

my regards

Rupert