(Bloomberg) -- Colombian President Gustavo Petro asked lawmakers to overturn a law that limits government spending just hours after data showed the economy shrank for the first time since 2020.
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Investors have been paying close attention to the administration’s economic policy, which includes a planned increase in public spending next year that led an autonomous committee to warn about a risk of breaching the fiscal rule in 2024 if no adjustments were made.
“The neoliberal fundamentalist thought that leads to a strict fiscal framework formula, a fiscal rule, should not continue in the country,” Petro said of the balanced budget law during a visit to an air force base on Wednesday. Any change to the nation’s fiscal rule would have to be approved by congress.
The leftist leader said the government needs to instead increase public spending to implement a countercyclical policy that promotes economic growth and offsets a drop in private investment.
Data from earlier on Wednesday showed that Colombia’s economy unexpectedly shrank in the third quarter by 0.3% from a year earlier as double-digit interest rates sapped investment and consumption. It was the first economic contraction in nearly three years.
Read more: Colombia Economy Unexpectedly Shrinks, Raising Odds of Rate Cut
--With assistance from Andrea Jaramillo.
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