He financial result of the national public sector (NPS) in the first half of 2024 was the best of the last 64 years, with an adjustment equivalent to 5.6 points of GDP, driven by spending cuts, according to a report by the IERAL Institute of the Mediterranean Foundation.
The analysis reflected that “if only the improvements in the financial result of 1% of GDP or higher are taken into account, there are 8 cases in 6 and a half decades, headed by the aforementioned first half of 2024, followed by 1985, when the Austral Plan produced an improvement of 4.6 points of GDP in the fiscal result, followed by the fiscal adjustments of 2003 (1.8 points of GDP), 2002 (1.7), 1977 (1.7), 1967 (1.5), 1984 (1.4) and 1991 (1.0).”
Referring to the engine that supported this result unlike what happened in other periods, the entity led by the former head of ANSES, Osvaldo Giordano, said that “What makes the adjustment in the first half of the year more noticeable is that all the improvement in the financial result must be attributed to a reduction in public spending.when in 1985, a year in which a strong improvement was also recorded, the entire contribution was made by the increase in resources (+6.2% of GDP), since spending rose that year by 1.6 points of GDP.”
Continuing along those lines, he stressed that “in the 8 years in which significant improvements were observed in the SPN’s financial results between 1961 and 2024, only on 3 occasions did the adjustment in spending contribute more than the increase in income, the most notable case being that of the first half of 2024.”
Fiscal adjustment: in which sectors did the most significant cuts occur?
Detailing the most significant cuts, the report noted that “In 2024, the 5.4 points of GDP adjustment in spending is explained by the reduction in transfer expenditures (pensions, tariff subsidies, current transfers to provinces, etc.), by 3.7 points of GDP, followed by lower capital expenditure (1.4), and a decrease in personnel expenditure (0.3)”.
The study stated that the fiscal result for the month of June showed a primary surplus of 0.08% of GDP and a financial surplus of 0.04%, with a first half of the year ending with a primary surplus of 1.2% and a financial surplus of 0.4% of GDP.
In this regard, IERAL explained that “this is a consequence of a annual reduction in expenditure of 35%, given that total income fell by 5%, in both cases in constant values.”
They also stated that the largest annual adjustments in spending in the first half of the year occurred in transfers to provinces (-98% for capital and -74% for current), in public investment (-71%), in economic subsidies (-43%) and in pensions (-27%).
As for the way in which the cuts were distributed so far this year, they specified that “the adjustment of primary spending was 39% annually in January, then slowing the fall until April, when the reduction was 24% annually,” while “From May onwards, the adjustment accelerated again, and ended the semester with a 35% drop in June.”
Improves spending on pensions
In this sense, they revealed that “Those that have been slowing down are spending on Personnel, Pensions and Capital expenditures, which fell less in the last 3 months of the semester than at the beginning of the year,” while “in contrast, expenditures on Other Operating Expenses, Transfers to Universities and Subsidies for Energy and Transportation accelerated the adjustment in the last two months.”
Source: Ambito
