In the first four months of the year, Retirements suffered a real loss of up to almost 40%, although they could have hit a floor in the month of February, according to IARAF calculations.
Between January and April, retirees with the minimum suffered a loss of 24% and the rest a loss of 37%, they indicated.
At the same time, “if May inflation is less than or equal to 7.8%, the purchasing power of pensions would have registered a floor in February 2024,” estimated by IARAF. If inflation continues to decline, “the change in trend will be consolidated, although what is done with the $70,000 bonus starting in June is key,” they added.
Given that the index to be applied in May is already known, 11%, according to March inflation, and the amount of the bonus for the minimum, we can project what may happen to purchasing power during May.
For retirees who do not earn the minimum, the nominal increase will be 11%, while for those who earn the minimum it will be 7.8%.
What happens is that Since the bonus is of equal value of $70,000 in both April and May, the total minimum retirement increases to a lesser extent.
Specifically, for a retiree with the minimum to have the same purchasing power in May as in April, inflation should be 7.8%. Given an expected inflation of 7.5%, the purchasing power of this retiree would increase somewhat compared to April. On the contrary, the retiree who does not earn the minimum would have a real increase of 3.3%, according to IARAF.
If the first 5 months of the year are accumulated, the retiree who earns the minimum would end up losing 21.7% of their real income for the same period in 2023.
For its part, those who do not earn the minimum would end up losing 33.9% of the real income they had in the first 5 months of 2023. As can be seen, given that in May the real interannual loss would be less than that of the first quarter, After 5 months a retiree would continue to lose a lot of purchasing power than in 2023, but less than what he lost at the beginning. The loss is being reduced, but remains at very high levels.
If monthly inflation continues to fall, the purchasing power of pensions may continue to improve, but starting from a very low floor. And always being below 2023, in the remainder of the year.
If this were to happen, The month of February could have been the floor of the purchasing power of retirements. In the case of retirees with the minimum, this situation will depend on what happens with the bonus starting in June (currently $70,000).
For exampleif the Government decided to maintain the value of the bond at $70,000 during the month of June and April inflation was 9%, the retiree with the minimum will have an increase of 6.5% in June. He would earn $207,000 if there was more than $70,000 in bonus. Indeed, so that its purchasing power does not decrease compared to May, June inflation is required to be equal to or less than 6.5%. If the Government If you decide to give a bonus of $75,000, for example, the inflation necessary to maintain purchasing power in May rises to 8.4%. We will have to see the decisions that are made regarding the value of the bonus.
In the case of retirees who do not receive a bonus, as long as June inflation is equal to or less than 9%, their purchasing power would remain the same or increase compared to May.
A relevant question is the discussion that exists in the National Congress in relation to the mobility rule. In essence it is being discussed the February floor level.
If inflation continues to fall, February would be the month with the lowest purchasing power. If there is an increase in the February retirement, the retiree would lose less in the accumulated year compared to 2023.
The other side of the coin is the level of public spending and the contribution of funds that the government achieved with the real reduction in pensions. About A third of the reduction in public spending in the first quarter came from the real cut in pensions. An increase in the February floor implies a higher level of spending in 2024, that is, a smaller cut compared to 2023. This is the conflict of objectives that is raised in Congress between the ruling party and the opposition.
Source: Ambito
