Colombia’s economic expanded at the fastest pace since 2006 in the third quarter, putting the country in a better position than its neighbors to weather a European debt crisis that’s curbing appetite for riskier assets.

The 7.7 percent surge exceeded all 30 analyst estimates in a Bloomberg survey, whose median forecast was for 6 percent annual growth. Since the series began in 2000, gross domestic product expanded at the current pace only once before, in the final quarter of 2006. GDP expanded 1.7 percent from the second quarter, the statistics agency said in Bogota today.

Colombia’s economy is gaining strength, while growth cools in other investment-grade rated countries like Brazil and Chile, as a result of a surge in spending on infrastructure and record foreign direct investment. GDP is expected to expand 4.5 percent next year, more than the 3.7 percent forecast for the rest of Latin America in a report yesterday by the United Nations.

“Colombia’s growth momentum is much stronger than anywhere else in the region,” Alberto Ramos, an economist at Goldman Sachs Group Inc. in New York, said in a phone interview. “If a crisis comes it will hit Colombia as it’s in a position of cyclical strength.”

Colombia’s peso bonds fell, sending yields higher, after the report. The yield on the nation’s 9.25 percent bonds due in May 2024 rose six basis points to 6.18 percent at 11:31 a.m. in Bogota, according to the stock exchange.

Construction

Growth in the third quarter was helped by a break in heavy rains and deadly flooding, clearing the way for the government to complete work on several road, energy and mining projects.

GDP expanded a revised 5.1 percent in the second quarter, the national statistics agency said in today’s report. Construction and mining activity each jumped more than 18 percent in the July-September period from a year ago, today’s GDP report showed.

The strong growth has helped lower unemployment, which at 9 percent is still the highest among major economies in Latin America. It’s also shielded the economy against a third-quarter drop in commodity prices as the benchmark West Texas intermediate crude fell 17 percent and the S&P GSCI Index of 24 raw materials fell 12 percent. Oil, coal and coffee account for about two-thirds of Colombia’s exports by revenue.

‘Magnificent News’

“This is magnificent news,” President Juan Manuel Santos said in a message posted on his Twitter account after today’s report. Finance Minister Juan Carlos Echeverry in a statement compared Colombia’s economy to “a table standing on many legs” as growth is driven by a diverse range of industries, everything from construction to transportation.

After today’s report Goldman Sachs raised its forecast for growth this year to 5.7 percent, up from 5.3 percent previous. Growth should ease next year to about 4 percent before accelerating again in 2013 to 5.1 percent, Ramos said.

“Other business cycles like in Chile and Brazil were maturing early in the year and now are on the downward part of the cycle, said Ramos. “You didn’t see a V-shaped recovery in Colombia, so they’re in great shape.”

Brazil’s economy contracted in the third quarter for the first time since 2009, and is expected to grow this year at less than half the 7.5 percent pace seen in 2010. Growth in Chile and Peru also slowed in the July-September period.

Faster growth may reignite concern about inflation, forcing investors to increase bets that the central bank will raise borrowing costs “sooner rather than later,” said David Moreno, a fixed-income analyst at Bogota-based brokerage Cia. de Profesionales de Bolsa SA.

Rate Outlook

Policy makers in November raised the overnight lending rate a quarter percentage point to 4.75 percent, citing the need to bolster the central bank’s credibility after “strong” growth drove up inflation expectations, according to minutes of the meeting. Banco de la Republica left the rate unchanged in the Dec. 16 meeting. Moreno expects policy makers to begin raising the key rate in the second half of 2012.

Annual inflation slowed more than expected in November, to 3.96 percent, after breaching the upper limit of the bank’s target range in October for the first time since 2009. Colombia targets inflation of 2 percent to 4 percent.

“Investment in the mining sector has helped a lot, consumer confidence is at high levels and inflation is relatively under control,” said Julian Marquez, an analyst at Bogota-based brokerage Interbolsa SA.

Record FDI

Inroads against guerrillas that increase security have drawn investors to Colombia including billionaires Eike Batista and Mexico’s Carlos Slim. Slim’s Grupo Carso SAB bought a stake this year in Geoprocesados SA’s Tabasco Oil Co., which owns rights to explore in eastern Colombia near fields owned by Ecopetrol.

Foreign direct investment by oil and mining may reach a record $15 billion this year, Juana Tellez, chief economist at Bogota-based BBVA Colombia SA, said in a Dec. 20 presentation.

The flows have helped stabilize the peso, which has weakened just 1.3 percent this year compared with more than 10 percent declines for currencies in Chile, Mexico and Brazil as investors avoid riskier assets amid Europe’s deepening debt crisis.

Some economic data point to a cooling in the economy, calming investors’ fears of overheating, said Marquez.

Retail sales rose 6.1 percent in October from a year earlier, slower than the 7.8 percent forecast in a Bloomberg survey. Industrial output grew 5 percent from the year before, down from 5.2 percent a month earlier.