The fiscal deficit would be taking its toll on the trade balance.

Colombia's external imbalance has once again raised alarm bells after JP Morgan warned in its most recent report that the country's structural fiscal deterioration is fueling an ever-widening trade deficit, driven by rising imports amid strong domestic demand.

While this institution recognizes that remittances continue to act as a partial relief valve, it warns that the imbalance persists and could become a source of additional pressure on the economy, primarily from factors such as debt or the exchange rate, in the future.

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According to the report, the merchandise trade deficit reached US$13.2 billion through August 2025, representing US$4 billion more than the same period last year; while in August alone, the monthly deficit reached US$2 billion, widening by US$320 million compared to 2024.

According to the organization, this behavior is not accidental, but rather responds to the push that domestic spending, largely financed with public resources, continues to exert on external demand and purchases.

JP Morgan warns that the growth in imports reflects an economy where consumption remains at a high pace, even in a context of slower growth. In the first eight months of the year, foreign purchases increased 10% annually, with particular strength in intermediate and final consumer goods. This pattern suggests that households continue to spend beyond the country's productive capacity.

Meanwhile, imports of capital goods have also gained ground, reinforcing the weight of the imported component in economic activity.

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Although imports in dollar terms remain nearly 11% below their "overheated" 2022 levels, volumes are now 12% higher, demonstrating that the trade imbalance is not driven by international prices but by robust and persistent domestic demand. For the bank, this phenomenon is consistent with the "ongoing structural fiscal deterioration," a term that links increased public spending with pressure on the trade balance.

Meanwhile, the contrast with exports is stark. Although international prices remain favorable, rising 3.3% year-on-year, export volumes fell 19%, resulting in almost zero total growth (+0.6%). Non-energy exports also grew 21.4%, but this increase was insufficient to offset the sharp decline in oil and coal sales, both in quantity and value.

In historical terms, export volumes are 36% below pre -pandemic levels, while prices remain 40% above the 2015–2019 average.

As a result, the three-month annualized trade deficit rose to US$22.4 billion, the highest level since 2022. Even on a FOB-FOB basis, the deficit reached US$18.5 billion, figures that confirm a persistent external imbalance against which JP Morgan maintains that, as long as domestic spending continues to exceed national savings capacity, the country will continue to rely on external financing to cover the difference.

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Remittance relief

The bank's report also states that remittances have helped moderate the impact , but are not sufficient. Between January and August, they grew 13.3% year-on-year, reaching record levels, although their pace is showing signs of slowing. In the last quarter, the flow registered a sequential decline of -1.1%, and according to the bank, this slowdown may be due to three factors, starting with stricter immigration policies in the United States.

This is also influenced by a less dynamic US labor market and the loss of momentum that early remittances enjoyed at the beginning of the year due to potential tax or immigration changes.

Thus, the combined trade and remittance deficit reached US$4.5 billion in the first eight months of 2025, a figure that shows that external flows are no longer able to balance the accounts. For JP Morgan, the trend points to a deeper structural imbalance, where high public spending and private consumption continue to push the economy beyond its real capacity to generate external revenue. Thus, the report concludes that, if this pattern is not corrected, the current account deficit will continue to widen, which could put pressure on debt and the exchange rate in the coming quarters. In other words, fiscal deterioration is moving from being a domestic problem to becoming an external threat to Colombia's macroeconomic stability. DANIEL HERNÁNDEZ NARANJO

Portfolio Journalist