Still betting on an opposition win
The congressional election results are the main source of worry for the political opposition camp in the presidential race. We analyze the percentage increase in votes cast for President Gustavo Petro’s Pacto Histórico candidates in the main cities, responsible for 41% of votes in Colombia. The increase in Santa Marta exceeded 200%, and in 12 other cities, rose by 50%-100%. Those are outsized results, especially since they occurred not only in traditionally more left-leaning Caribbean cities, such as Barranquilla and Cartagena, and in Bogotá; but also in cities of the so-called core coffee-growing region, of Medellín, Manizales and Pereira, normally regarded as conservative strongholds.
If these trends are maintained in favor of Petro-backed presidential candidate Iván Cepeda until the end-of-May and in the runup to the prospective June 21 second round, it would be very difficult for the opposition to defeat him. The latest polls show Cepeda with a solid lead, with 35% favorability in the first round, and the far-right Paloma Valencia, backed by ex-president Álvaro Uribe, with about 22%, and neck-in-neck for second place with right-wing candidate Abelardo de la Espriella. Meanwhile, Sergio Fajardo and Claudia López on the center-left both seem to be steadily losing ground. Yet the presence of at least seven leftist options on the ballot could prevent Cepeda from monopolizing that vote. There are also four more candidates on the political right.
The second round is shaping up to be a very tight race between Cepeda and the May 31 second-place finisher. We still assign a 70% probability to the prediction that the opposition will prevail.
Later than usual and with scarce publicity, the Finance Ministry published its 2026 Financial Plan (FP). The central government deficit announced for this year, 5.1% of GDP, left many, us included, in a state of disbelief. One cannot help but wonder whether the FP numbers are a joke, or if they only cover only Petro’s tenure until his successor takes office August 7. The most salient point is the absurd expected reduction in primary spending from 19.9% of GDP in 2025 to 18.2% in 2026, a forecast surely drawn from Wonderland.
Yet a faint glimmer of luck is shining on the dismal fiscal outlook, as the conflict in the Middle East has sent oil prices soaring. That will generate more funds both from higher dividends paid by Ecopetrol to the government, and higher income taxes paid by the entire oil sector. The FP assumed an oil price of $59.2 per barrel for 2026, but $100 per barrel could now be closer to reality. The extra $40 per barrel this year should result in COP 1.8 trillion (0.09% of GDP) in additional revenues for the central government in 2026. The remaining COP 5.6 trillion (COP 2.1 trillion in dividends and COP 3.5 in income taxes, or 0.28% of GDP) will materialize in 2027.
The Economic Tracking Index (ISE) index grew by a very weak 1.55% in January 2026 compared to January 2025, clearly indicating a slowdown in economic growth and surprising all analysts, who expected January growth to be higher. This marks the fourth consecutive month with a slowdown in the indicator, and the lowest y/y growth since April 2025 (0.18%). There’s little reason for optimism in the short term. The deceleration trend that began in Q4 2025 appears to be long-lasting, and the structural drivers behind it: a stagnant agriculture and mining sector, a construction industry in prolonged distress, and chronically low investment, are unlikely to reverse quickly. The only real driver pushing economic growth -- public spending -- is temporary and unsustainable. The next administration will inherit an economy with serious problems across various sectors, with economic growth supported almost entirely by falling private consumption and government spending, and with investment at historic lows; a fiscal deficit that remains above 6% of GDP; and a primary deficit well above 3% of GDP. A meaningful fiscal consolidation effort will be needed in H2 2026. This suggests that the leg supporting growth -- public spending -- will probably have to be cut off in order to achieve a true recovery.
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