Aurelia Butler

BOGOTA (Reuters) -Colombia will need a budget adjustment of 56 trillion pesos ($12.7 billion) to comply with its fiscal rule this year, an independent committee of experts said on Tuesday.The Andean country may also require a budget adjustment of 39 trillion pesos ($8.8 billion) in 2025, a report from the Autonomous Fiscal Rule Committee (CARF) said.Colombia’s government has already made cuts to its 2024 budget amid fiscal difficulties, and has been weighing further measures, including a possible 33 trillion peso trim.The finance ministry in June announced a cut worth 20 trillion pesos due to lower than expected income.The CARF already warned in July that Colombia could need additional adjustments to comply with the fiscal rule in 2024 and 2025 due to possible risks to tax collection goals, despite previous government announcements.The fiscal rule was created in 2011 to impose policy constraints meant to block deterioration of public finances. To comply with the rule in 2024, the government would have to keep debt at 55.3% of GDP, rising to 56.4% of GDP in 2025. More

Ukraine plans to spend 2.22 trillion hryvnias ($53.7 billion), or about 26% of its gross domestic product, on defence and security next year, officials said. More

If approved, the agreement would bring the total amount disbursed to Ukraine under the program to $9.8 billion, the IMF statement said, adding that the board was expected to review the deal in coming weeks. “The outlook remains exceptionally uncertain and Russia’s war in Ukraine continues to take a heavy toll on Ukraine’s people, economy, and infrastructure,” the funds’ staff wrote, adding that despite those challenges the program “remains on track.” “The economy has continued to show resilience despite the devastating challenges arising from Russia’s war in Ukraine, which has now lasted 1,000 days,” it added. “However, risks remain exceptionally high given uncertainty on the intensity and duration of the war, including from the continued attacks on energy infrastructure.”IMF staff, which met with Ukrainian officials Nov. 11-18, said the country’s real GDP growth was expected to be 4% this year but slow to 2.5%-3.5% in 2025 amid energy infrastructure damage and labor shortages.Inflation in Ukraine also reached 9.7% year-over-year in October over rising food and labor costs “but inflation expectations remain well anchored,” IMF staff concluded. More

SATARA, India (Reuters) – Indian Prime Minister Narendra Modi has taken several pro-farmer but inflation-stoking measures in recent months, such as easing curbs on rice and onion exports, but that may not prove enough for him to sway an election on Wednesday in a key state. Maharashtra, which includes the city of Mumbai, is a major grower of sugarcane, soybean, cotton and onions, but opinion polls – which have a patchy record in India – suggest Modi’s alliance may struggle to retain the local legislature as farmers say they have yet to benefit from the recent measures.An opinion poll by Lok Poll, covering more than 86,000 people in Maharashtra, showed last week that a coalition of opposition parties including Congress could wrest back the state with up to 162 of the 288 seats. It said low prices for crops such as soybean and cotton were a factor.Other surveys have also said the BJP alliance could lose. Votes will be counted on Nov. 23.Modi’s Bharatiya Janata Party (BJP) lost its parliamentary majority in national elections held between April and June partly due to farmers’ anger with the export curbs, which they felt prioritised Indian consumers above growers by keeping domestic prices low.In that national election, opposition parties won two thirds of the parliamentary seats in Maharashtra.”We faced a setback during the parliamentary elections because of the restrictions on onion exports,” senior BJP leader and Maharashtra deputy chief minister, Devendra Fadnavis, told an election rally on Sunday.”We have now lifted those curbs and Prime Minister Narendra Modi’s government will not impose export bans abruptly.”India has removed export restrictions on rice and onions, and raised the tariffs on imported edible oil in a bid to help local growers of mustard and soybean get better prices at home.TOO LATEBut farmers say the steps have come too late, as they had already harvested and sold their produce like onions to traders, who are now benefiting from a surge in domestic prices.Retail inflation soared to its highest level in 14 months in October, partly due to high prices of edible oils, onions and tomatoes.”When we were selling onions in March and April, the government didn’t allow exports,” said farmer Mahesh Gore in Maharashtra’s Nashik district.”We were forced to sell onions at 10 rupees per kg. If they had allowed exports then, we could have got double the price. Now prices are at 50 rupees, but only traders are benefiting.”In recent years, India restricted onion exports whenever wholesale prices rose above 20 rupees.Other farmers say they are not getting a good price for crops like soybeans because of a global glut now.Mahesh Khade said he was barely getting 3,900 rupees per 100 kg now for soybeans compared with 4,600 rupees a decade ago. Prices of diesel, fertilisers, and other inputs have more than doubled in the same period.”They have ignored farmers’ interests,” Khade said, adding he would switch sides now and vote for the opposition.The BJP did not respond to requests for comment.($1 = 84.38 rupees) More

BERN (Reuters) – Switzerland said on Tuesday it was concerned by U.S. President-elect Donald Trump’s proposals to raise tariffs and is considering how to respond if his new administration does so.Trump aims to shift the aggressive trade agenda from his first term into higher gear with across-the-board 10% tariffs on imported goods and even higher levies on imports from China.That could hurt the export-oriented Swiss economy, which has the United States as its biggest market, experts say. Around a fifth of Swiss exports of goods currently go to the United States, customs data shows, making the country a more important market for Switzerland than Germany, China or France.”Switzerland is concerned about Donald Trump’s announcement to impose additional tariffs on all goods imported in to the U.S.” a spokesman for the Swiss State Secretariat for Economic Affairs (SECO) said on Tuesday.”Switzerland clearly rejects the plans,” they said of the proposals, adding they contravene the rules-based international trading system which is crucial to the Swiss economy.SECO said Bern was examining “sensible responses” and seeking discussions with the relevant U.S. authorities, as well as counterparts in Germany, France, Italy and the EU.SECO did not give details on what responses were being considered, although Switzerland’s leeway could be restricted after it scrapped all industrial tariffs this year.Currently the U.S. has low single-digit tariffs on the import of industrial goods, with many Swiss industrial exports to the U.S. duty-free.While experts and central bankers in Europe have warned about the damage from rising trade barriers, governments have so far been cautious on how to respond on Trump’s plan.Economists have estimated that Swiss economic output could be reduced by 1% if severe amplification effects like a trade war broke out or companies started relocating to avoid tariffs.The Swiss pharmaceutical industry, manufacturers of machinery, appliances, precision instruments, watches and foodstuffs, for example, would suffer significantly from higher tariffs, economists at the ETH university in Zurich have warned.Other countries have also warned about fall-out from tariffs, with Bundesbank President Joachim Nagel saying earlier this month that Germany’s economy could lose 1% in economic output. More

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BENGALURU (Reuters) – The Bank of England will keep Bank Rate on hold in December as global inflation worries resurface, according to a Reuters poll of economists who were split on the impact U.S. President-elect Donald Trump’s proposed tariffs would have on the UK economy.Trump’s proposed tariffs, a 10% levy on imports from all foreign countries and 60% on imports from China, was expected to slow global growth and reignite inflationary pressures, limiting room for most central banks to ease policy.Nearly 90% of economists, or 22 of 25, who answered an additional question in the Nov. 13-19 poll said the proposed tariffs would be implemented early next year.However, they were split on the impact it would have on the UK economy over the next two to three years. While 11 of 21 said it would be insignificant, the rest said significant.Those findings contrasted with a Reuters survey on the euro zone economy, where a majority of economists, 34 of 39, said Trump’s proposed tariffs would have a significant impact.”A universal U.S. tariff could significantly impact the global economy…although the UK has a goods trade deficit with the U.S. and may not face the most severe tariffs,” said Stefan Koopman, senior market economist at Rabobank.SLOW AND STEADY FOR BOEStarting its easing cycle in August, the BoE has taken Bank Rate from a 16-year high of 5.25% to 4.75% with two cuts of 25 basis points.All 66 economists surveyed expected no change from the BoE in December. Poll medians showed rates falling 25 basis points every quarter next year, dropping to 3.75% by end-2025.Every respondent who expressed a view predicted the next cut would come early next year.Of 58 economists who provided forecasts until end-2025, 50% or 29 of 58, predicted Bank Rate to fall 100 basis points next year. While 19 said 125 bps or more, 10 said by 75 bps or less.Among 15 Gilt-Edged Market Makers, five each predicted 125 or 100 basis points of cuts, three said 75 bps while two said 150 bps.”The Autumn Budget was notably more expansionary than anticipated – raising the prospect of stronger demand in the near term – while the increase in employer National Insurance Contributions is likely to add to inflationary pressures,” noted economists at Goldman Sachs.”We look for wage growth to fall back notably given that headline inflation is now close to target.”Poll medians showed inflation would average 2.5% in 2024, 2.3% in 2025 and 2.1% in 2026, broadly unchanged from last month’s survey.The UK economy was forecast to grow 0.9% this year and 1.4% in 2025 and 2026, close to the BoE’s own predictions. Earlier in November the BoE cut its growth forecast for this year to 1.0% from 1.25% but raised its 2025 forecast to 1.5% from 1.0%.(Other stories from the Reuters global economic poll) More

MILAN (Reuters) -ECB policymaker Fabio Panetta said on Tuesday the European Central Bank should cut interest rates so they no longer curb economic growth, or so they even stimulate it, and give more guidance now that post-pandemic shocks are abating and inflation is normalising. Panetta’s comments bring into the open a growing debate inside the ECB about how far the euro zone’s central bank should cut rates at a time when inflation is close to the bank’s 2% target and economic growth is stagnating.The Bank of Italy’s governor, one of the ECB’s most outspoken advocates of looser monetary policy, said the ECB needed to “focus on the sluggishness of the real economy” and move official interest rates into “neutral, or even expansionary, territory”.”With inflation close to target and domestic demand stagnant, restrictive monetary conditions are no longer necessary,” he said in a speech at Milan’s Bocconi University, adding that inflation could fall well below target in the absence of a sustained recovery.”A scenario that would be difficult for monetary policy to counteract and should therefore be avoided,” he said.The ECB has cut interest rates three times since June after seeing inflation, which hit double digits in the wake of Russia’s invasion of Ukraine in 2022, drop to its 2% target.Panetta said the euro zone economy was returning to “charted territory” after the “exceptional shocks of 2022-2023″ and inflation forecasting errors were normalising.The ECB’s most recent cut, in October, saw it reduce the rate it pays on bank deposits by a quarter of a percentage point to 3.25%.”We are probably still a long way from the neutral rate,” Panetta said.Economists define the neutral rate as one that neither restricts nor spurs economic growth and see this in the euro area at between 2% and 2.5%, although estimates are as high as 3% and as low as 1.75%.Investors expect the central bank to lower borrowing costs by another quarter of a point at its next meeting on Dec. 12, followed by more cuts through the spring. This would leave the ECB’s deposit rate at 1.75% to 2.0%.Having managed to steer the euro zone’s economy through uncharted waters, the ECB should change its “meeting by meeting” approach to monetary policy dictated by the exceptional circumstances of the past two years, which forced it to give less weight to forecasts, Panetta said.”We can now return to a more traditional, genuinely forward-looking approach to monetary policy, in line with our medium-term orientation.” Panetta also said the ECB should “provide more guidance on the expected evolution of our policy than has been the case in the recent past.”This will help firms and households to form their views on the future path of policy rates, thereby supporting demand and the recovery of the real economy.”That view pitches Panetta against leading hawk Isabel Schnabel, who said last week such “forward guidance” was “of limited use” in what remained a “volatile environment”.Wrong-footed by a surge in inflation in 2021-22, the ECB has ditched its habit of providing official guidance about the future path for monetary policy.Instead, it has insisted it would make decisions ‘meeting by meeting’ based on incoming data – albeit not without the occasional hint about what to expect. More