The first half of the year is over, the market’s question is how the Government can reach the end of the year with its fiscal numbers in order. The second half of the year presents greater challenges because seasonally there is a higher execution of games, combined with a drop in revenue from foreign trade.
Still, the Government has several aces up the sleeve to face the end of the year. For some analysts, could increase spending by 10 to 15 points without endangering the “fiscal anchor”. Others warn that Luis Caputo has to maintain a gap between the evolution of spending and income of 17 points.
This Thursdaythen, we will begin to know how the Minister of Economy began to transit the second part of 2024. The government will announce the result of the July tax collection to maintain June’s momentum. Last month, AFIP revenues showed a 14% drop. The effect of the fiscal package will not be felt until August. This is one of the legs of the fiscal anchor. The other is spending.
The market approved the “chainsaw”
According to the economist and head of research at Cohen Argentina, Martin Polo, In a conversation with investors, the best asset that the Government has to show the market, so far, is the commitment to the fiscal anchor.
“If this discipline is maintained until the end of the year – obviously it will be more challenging because we believe that the spending adjustment will be less – in a context in which more will be collected from Income Tax and from money laundering, We can say that he got a very good 10 in fiscal matters,” said Polo.
At Cohen they estimate that the relationship between income and expenses should have a “separation” of 17 points to achieve that goal. And in the first half of the year, total revenues fell by 5% and expenses by 30%. The gap was 25 points.
The Government can cut less
For the Argentine Institute of Fiscal Analysis (IARAF), the numbers could fluctuate between two alternatives: that the government closes 2024 in perfect balance, or that reaches a slight surplus of 0.4 GDP points
To do this, it takes into account that total income will fall by 5% between July and December, a GDP drop of 3.5%, and debt interest spending similar to that of 2023.
“Given the real year-on-year drop of 32.2% from January to June, In the first assumed scenario (perfect equilibrium), primary spending should fall by 20.6% in the second half of the year,” says IARAF. If it were adjusted further than that, there would be a deficit. For the year to end at zero, real spending in 2024 would have to fall by 26.4%.
“In the second scenario, real primary spending would have to fall by 24.2% year-on-year in the second half of the year to achieve a surplus of 0.4% of GDP”says the study. In that case, spending would fall by 28.2% over the 12 months.
The study points out that “under the two scenarios, that of fiscal balance and surplus of 0.4% of GDP, The national government may reduce the intensity of the spending adjustment in the second half of the year.”
In this regard, he clarifies that “projecting the expenditure on pensions for the second semester and using for the rest of the expenses its participation during the first, “Virtually all expenses would see a reduction in the rate of year-on-year decline, comparing the second half with the first.”
Source: Ambito
