Latest news with #economicshocks
Yahoo
5 days ago
- Business
- Yahoo
Chancellor faces fiscal risks and ‘significant challenges' amid trade war
The Chancellor could be left at risk of breaking her fiscal rules by unexpected economic shocks and faces 'significant challenges' in delivering the Government's agenda, the International Monetary Fund (IMF) has warned. The IMF said the UK's 'limited' so-called headroom on its public finances gave little room to manoeuvre and called on Rachel Reeves to consider some tax changes or spending cuts. In its annual report on the UK economy, the IMF said: 'Risks to this strategy must be carefully managed. 'In an uncertain global environment and with limited fiscal headroom, fiscal rules could easily be breached if growth disappoints or interest rate shocks materialise.' The IMF praised the Government's fiscal plans, saying they 'strike a good balance between supporting growth and safeguarding fiscal sustainability'. It added that the pro-growth agenda 'covers the right areas to lift productivity'. But the IMF cautioned that 'delivering on this agenda will require overcoming significant challenges' amid the fallout from US President Donald Trump's trade war. 'Shockwaves from trade policies and rapid geopolitical developments are affecting global growth and creating heightened levels of volatility in financial markets,' it said. Added to this, it said, 'fiscal space is limited and constrained by an elevated interest burden and increasing demands on public resources, including defence and aging-related spending'. Ms Reeves said the report 'confirms that the choices we've taken have ensured Britain's economic recovery is under way, and that our plans will tackle the deep-rooted economic challenges that we inherited in the face of global headwinds'. 'Our fiscal rules allow us to confront those challenges by investing in Britain's renewal,' she said. The Washington-based IMF also recommended cutting the number of assessments of whether the Government is on track with its fiscal rules by the Office for Budget Responsibility (OBR) from two to just once a year, ahead of the autumn budget. This could 'reduce pressure for overly frequent changes to fiscal policy', it said. The Chancellor's headroom against her main fiscal rule was estimated at £9.9 billion at the time of the spring statement in March. But the Government's U-turns on planned cuts to spending since then, such as changes to the welfare bill, are seen as having wiped this out, according to experts. This has raised fears that Ms Reeves will be forced to raise taxes or cut spending in the autumn budget. The IMF left its forecasts unchanged for the economy to grow by 1.2% this year and 1.4% in 2026. However, it added a note of caution, saying that 'risks to growth remain to the downside'. 'Tighter-than-expected financial conditions, combined with rising precautionary saving by households, would hinder the rebound in private consumption and slow the recovery,' the IMF said. Shadow chancellor Sir Mel Stride said: 'This is yet more confirmation that Labour's mismanagement means that yet more tax rises are coming in the autumn.'


The Independent
5 days ago
- Business
- The Independent
Chancellor faces fiscal risks and ‘significant challenges' amid trade war
The Chancellor could be left at risk of breaking her fiscal rules by unexpected economic shocks and faces 'significant challenges' in delivering the Government's agenda, the International Monetary Fund (IMF) has warned. The IMF said the UK's 'limited' so-called headroom on its public finances gave little room to manoeuvre and called on Rachel Reeves to consider some tax changes or spending cuts. In its annual report on the UK economy, the IMF said: 'Risks to this strategy must be carefully managed. 'In an uncertain global environment and with limited fiscal headroom, fiscal rules could easily be breached if growth disappoints or interest rate shocks materialise.' The IMF praised the Government's fiscal plans, saying they 'strike a good balance between supporting growth and safeguarding fiscal sustainability'. It added that the pro-growth agenda 'covers the right areas to lift productivity'. But the IMF cautioned that 'delivering on this agenda will require overcoming significant challenges' amid the fallout from US President Donald Trump's trade war. 'Shockwaves from trade policies and rapid geopolitical developments are affecting global growth and creating heightened levels of volatility in financial markets,' it said. Added to this, it said, 'fiscal space is limited and constrained by an elevated interest burden and increasing demands on public resources, including defence and aging-related spending'. Ms Reeves said the report 'confirms that the choices we've taken have ensured Britain's economic recovery is under way, and that our plans will tackle the deep-rooted economic challenges that we inherited in the face of global headwinds'. 'Our fiscal rules allow us to confront those challenges by investing in Britain's renewal,' she said. The Washington-based IMF also recommended cutting the number of assessments of whether the Government is on track with its fiscal rules by the Office for Budget Responsibility (OBR) to once a year ahead of the autumn budget. This could 'reduce pressure for overly frequent changes to fiscal policy', it said.

Zawya
22-07-2025
- General
- Zawya
Strengthening vulnerability analysis to tackle food insecurity in Southern Africa
Food insecurity in Southern Africa is worsening, driven by erratic weather patterns, pest outbreaks, and economic shocks. An estimated 46.3 million people across seven countries -Botswana, the Democratic Republic of Congo, Eswatini, Lesotho, Madagascar, South Africa and Tanzania— are projected to fate acute food insecurity during the 20205/26 consumption period. As shocks intensify, timely and harmonized vulnerability assessments remain critical to inform early action, response planning, and policy development. To this end, representatives from 11 Southern African Development Community (SADC) Member States, joined by regional and international partners including the Food and Agriculture Organization of the United Nations (FAO), World Food Programme (WFP), Famine Early Warning Systems Network (FEWS NET), and the Integrated Food Security Phase Classification (IPC) Regional Support Unit, gathered virtually from 14 to 16 July 2025 for the Annual Dissemination Forum of the SADC Regional Vulnerability Assessment and Analysis (RVAA) Programme. The event was followed by the 29th Steering Committee meeting on 17 July 2025. Despite data collection and budgetary challenges, seven Member States successfully completed their national assessments and presented findings at the forum. These findings contributed to the finalization of the 2025 Regional Synthesis Report on the State of Food and Nutrition Security in SADC, validated by the Regional Vulnerability Assessment Committee (RVAC). The report highlights a concerning uptick in food insecurity, particularly in the Democratic Republic of Congo, Mozambique and low-income urban areas, underscoring the compounded impact of the 2024 El Niño-induced drought, ongoing conflict, and high food prices. At the same time, the region experienced normal to above-normal rainfall in many areas during the 2024/25 season, supporting a modest recovery in cereal production and grazing conditions, particularly in countries like Tanzania, Lesotho and Eswatini. FAO's technical support and way forward As a long-standing partner of the RVAA system, FAO continues to support Member States in enhancing the quality and use of vulnerability assessments. This includes contributing technical expertise to the Regional Vulnerability Assessment Committee, promoting alignment with IPC frameworks, and strengthening links between data and early action. Looking ahead, FAO will continue engaging with SADC Member States and partners to improve the quality and coverage of vulnerability assessments across the region. This includes supporting harmonization of tools and methodologies, promoting digital data collection systems, and fostering cross-country learning and peer-to-peer exchange. FAO is committed to working alongside the SADC Secretariat to strengthen the institutional sustainability of the RVAA programme and integrate early warning into broader disaster risk management systems. The outcomes of the 29th Steering Committee meeting reaffirm the urgency of accelerating investment in regional food security analysis. The Committee called for renewed efforts to mobilize resources for the upcoming landscape analysis of existing national frameworks, which will inform the development of a harmonized vulnerability assessment framework for the SADC region by 2026. FAO will remain a key technical partner in this process, offering expertise to ensure that the proposed framework is scalable, inclusive, and responsive to the complex drivers of vulnerability facing Southern Africa today. Distributed by APO Group on behalf of Food and Agriculture Organization of the United Nations (FAO): Regional Office for Africa.


Daily Mail
09-07-2025
- Business
- Daily Mail
Majority of British workers vulnerable to Trump trade war shocks, warns BoE
Three-fifths of British workers are vulnerable to further economic shocks due to Donald Trump's trade war, according to the Bank of England. In a hard-hitting report, the central bank said manufacturing and retail sectors were particularly exposed if the situation deteriorates, despite the UK's trade deal with the US. Firms could be directly impacted by higher taxes on goods shipped to the US and by the indirect effect on consumer demand and difficulties accessing financing. In its latest Financial Stability Report, the Bank said: 'Further shocks could particularly impact firms in sectors dependent on demand from the US market such as manufacturing. 'These sectors and others such as retail trade are also vulnerable to broader reduction in consumer demand globally as well as often being less able to recover earnings through adjusting prices. 'Staff analysis suggests that firms in sectors likely to be more impacted by the global trade shock – either directly or indirectly – account for around 60 per cent of UK employment.' The Bank also warned trade tariffs could increase the risk of some businesses falling behind on loans. Households and businesses nonetheless remain resilient, and the UK banking system is equipped to support them even if conditions significantly worsen, the Bank's Financial Policy Committee (FPC) said. The FPC said there was a high degree of unpredictability about how global trade will evolve, with US President Donald Trump hiking tariff rates in April but negotiations with other countries over possible trade deals ongoing. Conflict in the Middle East has also raised the risk of energy prices spiking, particularly if the supply of oil and gas were disrupted, it found. This could particularly impact businesses that are more reliant on financing linked to global financial markets, which have faced turbulence in recent months. 'The potential for much higher trade tariffs increases the likelihood of corporate default in the most exposed sectors, and losses for their lenders,' the FPC's Financial Stability Report read. The outlook for the UK is weaker and more uncertain than it was in November, when the committee previously produced a report, it said. An escalating trade war could weigh on UK businesses should global consumer demand weaken, lending conditions tighten, or reduced availability of funding causes firms to slow down investment. However, the FPC concluded that despite pockets of vulnerability, UK businesses would typically be able to pay their debts even in the face of further global volatility such as lower demand and supply. Furthermore, the report found that the UK banking system has the capacity to support households and businesses even if economic and business conditions became substantially worse than expected. Meanwhile, the committee warned that intensifying geopolitical tensions could raise the risk of cyber attacks around the world. It said this was a 'global challenge' but that UK financial firms were generally prepared to deal with cyber incidents.


The Independent
08-07-2025
- Business
- The Independent
UK public finances in ‘vulnerable position' after Starmer's U-turns, OBR warns
Britain's public finances are in a 'relatively vulnerable position', the official spending watchdog has warned, with recent attempts to shore up the government 's balance sheet showing limited success. The Office for Budget Responsibility (OBR) said Sir Keir Starmer 's U-turns on benefit cuts and winter fuel payments were driving the continued increase in government debt. In a stark warning, the watchdog said debt would hit more than 270 per cent of the UK's entire economic output by the early 2070s. The ever-expanding debt pile is causing a 'substantial erosion of the UK's capacity to respond to future shocks and growing pressures on the public finances', the OBR added. Rachel Reeves is scrambling to fill a multi-billion pound black hole in the public finances ahead of her second Budget this autumn. The chancellor will have to find an additional £5bn to plug the gap left by Sir Keir's climbdown on welfare reform, as well as more than £1bn to fund winter fuel payments for millions of pensioners after a previous U-turn. The chancellor's headroom against her existing fiscal rules is also vulnerable to any downgrade since the OBR's last economic growth forecast, which looks likely amid the fallout from Donald Trump's global trade war. In a report which will set alarm bells ringing in the Treasury, the OBR said: 'The UK's public finances have emerged from a series of major global economic shocks in a relatively vulnerable position.' At the end of last year, government debt stood at 94 per cent of GDP, the sixth highest among the world's advanced economies, while the UK was facing the third-highest borrowing costs in the world.