BOGOTÁ, Dec 30, 2025 (BSS/AFP) - Colombian President Gustavo Petro announced on Monday the country's minimum wage would increase by 23.7 percent starting in the new year, its highest raise in 25 years.

The increase, coupled with the government's transportation subsidy, would take the monthly minimum wage from 1.6 million pesos ($422) to two million pesos ($520).

"With these measures, we seek to reduce inequality," Petro said in a speech alongside Labor Minister Antonio Sanguino, though he added that "there will be pressure on prices."

Petro, Colombia's first leftist president, has overseen a series of minimum wage hikes since coming to power, including a 16 percent raise in 2023.

Colombia's Ministry of Finance and Public Credit said Petro's administration has raised the minimum wage by 42.4 percent over the past three years.

Economists warn the sharp increase could negatively impact the cost of living and inflation, with Colombia's central bank expecting inflation of about 4 percent next year.

"An increase well above inflation is a boost that is unsustainable because it translates into more inflation...with a macroeconomic effect that would destabilize the Colombian economy," Jorge Restrepo, a professor of economics at Javeriana University, told AFP.

Roughly half of workers in Colombia, many of whom work informal jobs, make less than the minimum wage, according to Colombia's National Administrative Department of Statistics.

Fabio Arias, president of one of the largest labor unions in Colombia, said business leaders complaining about the wage hike were lamenting that "working people could start doing well."

Colombia's economy has exceeded analyst projections, with GDP growth between 2.6 and 2.7 percent expected by the end of the year.