Conjoncture

Conjoncture

    Conjoncture - 18 March 2022
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    Colombia’s public finances have come under the spotlight in recent years amidst recurrent adverse external shocks, rising social spending pressures, ongoing challenges in raising revenues, persistent (optimistic) biases in fiscal planning and, as of late, the back loading of fiscal consolidation plans following the Covid-19 shock. The rapid progression of the public debt ratio and the capacity for future policy adjustment have, in particular, become points of concern and have, since the summer 2021, materialized in Colombia losing its investment grade status. However, overly focusing one’s attention on debt levels, debt dynamics or the speed of fiscal adjustment to assess fiscal sustainability in Colombia can lead to overlook important risk-mitigating aspects of the sovereign’s credit profile. Despite facing a challenging scenario of its underlying debt drivers, the sovereign maintains a solid capacity to support debt backstopped by a favorable interest-to-growth differential, low contingent liabilities, a manageable debt-servicing burden and a sound institutional framework. Looking forward, engaging the broadest swath of society in shaping fiscal policy represents a significant challenge that could – if done inclusively – pay important dividends in terms of both economic and fiscal outcomes.
    Conjoncture - 18 December 2021
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    The Covid-19 pandemic has laid bare weaknesses and vulnerabilities in global supply chains. It has increased calls for making global value chains (GVCs) more robust and resilient, and reducing the dependence on East and Southeast Asia. Enterprises are in the process of improving the resilience of their supply chains by improving the transparency of their value chains, and building more redundancy in supplier networks, and transportation and logistics systems. At the macro-level, both the United States and the European Union have been updating their industrial strategies to increase their autonomy in strategic sectors. However, we should not forget that GVCs in itself is not the problem. On the contrary, during the Covid-19 crisis, GVCs have often been a solution, as it has helped to smooth shocks to supply of globally-consumed products.
    Conjoncture - 30 November 2021
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    So far, Egypt’s economy has weathered the Covid-19 crisis without any significant worsening of its main macroeconomic indicators. GDP growth has remained positive, and the country's budget and external balances are relatively stable. The macroeconomic stabilisation achieved in previous years and external financial support are the main reasons behind these positive performances. In the short term, the outlook is mixed. The rebound in inflation, if it were to persist, could trigger a cycle of monetary tightening, with negative consequences for public finances. In addition, Egypt's external vulnerability remains significant given structural current account deficits and dependence on portfolio investment flows. More fundamentally, the pace of growth is not sufficient to absorb the growing labour force, fuelling the informal economy. The main solution to these challenges lies in increasing private sector (non-hydrocarbon) investment and productivity, which are two recurrent weaknesses of the Egyptian economy.

On the Same Theme

Deterioration of public finances in Colombia: why and should we be concerned? 10/1/2021
The deterioration of public accounts in Colombia can be explained as much by cyclical factors than structural ones. It is also symptomatic of a greater difficulty in enacting an ambitious fiscal reform especially in the face of rising social tensions in the country. Although public finances are unlikely to improve decisively in the short term, the country exhibits a number of strengths that should help contain the build-up of risks in the medium term. Colombia should be in a better position to ensure the sustainability of its public finances if it is better able to engage the population at large and generate greater consensus around fiscal issues. 
Colombia: who holds the public debt and in what proportion? 12/11/2019
When looking at Colombia’s creditors by residence and type of institution over the past 10 years, we observe three main dynamics at play: first, non-residents have increased their exposure to the sovereign in both relative terms but also in absolute terms as the general government’s debt burden has increased by 20 percentage points of GDP in the intervening time. Second, most of that increase has been driven by larger holdings from foreign non-banks (i.e. investment management industry) which in fact have captured the shortfall in sovereign financing left behind by domestic banks. Finally, non-residents have altered the currency composition of their holdings as evidenced by their comparatively much larger exposure to local currency public debt instruments over the period.
Colombia: A balancing act 5/17/2019
Improvements on the economic front contrast with greater uncertainty on the political front.

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