Colombia’s gross domestic product rose 2.3% year on year in the fourth quarter.
This was below the 3.1% increase expected.
Because Colombia’s economy is growing much more slowly than expected, the Colombian peso may weaken against the US dollar. The 2.3% result is a clear miss versus the 3.1% forecast and points to a softer economy. That could push USD/COP, now near 4,150, toward 4,300, a level last seen in late 2025.
This weak growth number also increases pressure on the Banco de la República to cut interest rates sooner than planned. Inflation is still high at 5.9% in January, but the central bank may need to respond to a slowdown of this size. Traders may want to look at interest rate swaps that benefit if short-term rates fall by mid-year.
For currency traders, buying USD/COP call options is a direct way to express this view. Options with strikes around 4,250 and 4,300, expiring in April or May, could gain if the peso drops. A similar move happened in Q3 2023, when a growth scare led to a fast 4% peso devaluation over the next six weeks.
On the equity side, the MSCI COLCAP index looks exposed because slower growth can reduce earnings expectations. Put options may help hedge against a decline toward the 1,300 support level. Consumer discretionary and industrial stocks are likely to be hit hardest.
Because this miss was unexpected, implied volatility may rise across Colombian assets. The COLCAP’s volatility gauge has already moved up from 18% to 21% in early trading. In this setting, strategies that benefit from bigger price swings—not only a one-way bet—may work best.
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