The government of Javier Milei raised to the level of religious dogma the idea that a healthy public budget must be achieved and maintained at whatever cost, even in the context of a deep recession. Recently, in public statements, the president has said that The only point in his Government program that he is not going to sacrifice is the chainsaw.
Because of the “chainsaw and blender” enthusiasm in In the first quarter of the year, the Minister of Economy, Luis Caputo, would have gone too far with the cut, for the equivalent of 1 point of GDP in annualized terms.
The estimate is from the economist Nadin Argañaraz, from the Argentine Institute of Fiscal Analysis (IARAF), who, based on the structure of expenses and income from the first quarter, projected them for the entirety of 2024., assuming that is maintained throughout the period. It is evident that they are going to vary.
“The fiscal adjustment of first quarter was equivalent, in annual terms, to 5.5 percentage points of GDP, that is, 1 percentage point of GDP higher than necessary to achieve fiscal balance,” Argañaraz said in his report.
The report recalls that “In January the adjustment had been equivalent to 8 percentage points and in the first two months to 7 points percentages of GDP. The fiscal balance requires an annual effort of 4.4 points percentages of GDP,” he explained.
The study states that “by annualizing the real interannual variations in income and expenses for the first four months of the year, “It is possible to obtain a measure in terms of the annual primary surplus.”
“In the quarter, total income fell by 5% in real terms and primary spending fell by 32% in real terms. For his part, the spending on debt interest increased by 3.1% in real terms”, he explained.
In this way, it maintains that “the equivalent annual improvement in the primary result is 5.6 percentage points of GDP, which would mean going from a primary deficit of -2.7% of GDP in 2023 to a surplus of 2.9% of GDP in 2024.”
“The annualized interest expense is 1.8% of GDP. Therefore, the annualized financial result is positive by 1.1% of GDP (it was negative 4.4% of GDP in 2023)”, highlights the report.
As Argañaraz clarifies, it is important to highlight that “These annualized data do not mean a fiscal projection of 2024, but an equivalent annualization of the fiscal behavior of the first quarter of the year.”
It is evident that The structure of expenses and income will vary in the remainder of the year, especially in the second semester where there is a higher level of executionand at the same time, income from foreign trade falls after the harvest liquidation season.
For example, although the average expenditure adjustment for the first quarter was 32% in real terms, in April it was well below the average, at 24%, which indicates that the Government will no longer obtain the wide margins of surplus the first months of the year.
In March, For example, the drop in total spending was 28.7% in real terms compared to the same month in 2023, so that by April a little more than 4 points had already been lost in the interannual comparison.
The enthusiasm of the economic team to give good news
Traditionally, the Data from the National Public Sector (SPN), cash basis, were reported between the 20th and 21st of each month, but since the Government began to generate surplus balances, The Treasury Palace has been anticipating the data for a couple of days, generally for the previous Thursday or Friday.
That is why now the Ministry of Finance decided to whitewash the situation. The data for May will now be released on June 18. The rest will be published on July 16, August 16 and September 19.
Source: Ambito
