The social and economic challenges of the new Colombian administration
The transition from the Gustavo Petro administration to that of Abelardo de la Espriella represents a significant challenge for Colombia. In political terms, it marks a shift from a left-wing to a right-wing administration. In economic and social terms, it also signals challenges ahead.
In social terms, the major issue is the extent to which the new administration will uphold the commitment to social rights enshrined in the 1991 Constitution. This has been reflected in a long-term reduction in Colombia’s multidimensional poverty, particularly in access to education, health and utilities, and improvements in housing conditions, albeit with a growing rural-urban gap. These trends have continued in recent years, but the new administration will inherit a major crisis in the health system that it must address.
A key element of this positive trend has been the significant long-term increase in public sector social spending. A major question, therefore, is how the new administration will manage this trend in the face of a strong fiscal crisis, as well as pending spending increases in the health system and other sectors. There is also the important question of how social policy responsibilities will be divided between national and sub-national governments – both to implement the 2024 reform that increased the revenue share of the sub-national authorities and to honour de la Espriella’s commitment to support them.
In terms of income poverty and unemployment, the new administration inherits comparatively better conditions. The rise in income poverty during the Covid-19 pandemic was reversed in 2025, with further improvement in 2026, although with a significant rural-income gap. Unemployment – at 8% in May 2026 – is among the lowest levels of the current century, comparable to those in 2013–14, at the peak of the decade-long expansion that the economy had experienced since 2003. However, this has largely reflected strong growth in public sector employment, which will itself face fiscal adjustment. High levels of informal employment have also been key, accounting for nearly half of urban employment and more than four-fifths in the rural areas.
Colombia’s economy has seen correction of two significant imbalances that emerged during the 2022 overheating episode and the global oil price shock: a large balance of payments imbalance and the deficit in the domestic Fuel Price Stabilisation Fund. A positive element has been the growth of non-traditional exports. So, the continuation of this trend under the new administration will be essential. However, these exports – along with sectors competing with imports – now face serious challenges due to the peso’s appreciation and the sizeable increase in the minimum wage. In US dollar terms, the minimum wage has increased by over 40%.
The economy rebounded after the sharp growth slowdown in 2023, which followed the overheating of 2022. However, this recovery was modest – around 2.5% in annual terms – and marked by a decline in the mining and construction sectors, a delayed recovery in manufacturing and, particularly very low levels of investment at around 17% of GDP compared with 22% in the 2010s.
Furthermore, the agricultural sector is now facing a downturn that may be exacerbated by the effects of El Niño. This phenomenon also raises the risk of electricity rationing due to the very slow growth in generation capacity during the Petro administration and the increasing domestic natural gas shortages. Although an economic recovery is possible, the expectation of a 7% annual GDP growth rate that de la Espriella has promised appears highly ambitious; a more modest target – perhaps around 4% – would be advisable.
The new upward trend in the inflation rate will also be problematic and, no doubt, associated in part with the increase in minimum wage. This has led Banco de la República to raise its interest rate by almost three percentage points. It is possible that rates have reached their peak and that the central bank may now focus on containing further appreciation of the peso.
Of particular importance is that the new administration will face a major fiscal crisis. Since 2024, the central government has run deficits of 6–7% of GDP (Figure 1) – among the highest in the country’s history and in Latin America. The basic reason has been the strong increase in current spending, which has increased by 4.4 percentage points relative to the average of the 2010s, while public investment has performed very poorly.
Figure 1: Colombian fiscal revenue, expenditure and balance (% GDP)