The public debtgrew in the first semester in relation to GDP, according to a report from the Catholic University of Uruguay (UCU), which in any case predicted that the situation could be reversed by the end of the year.
According to the survey of the UCU, both the gross debt as the net (assets) grew when compared to December. The gross amount reached 68.5% of GDP in June, compared to 67.2% at the end of the year, while the debt without public sector assets stood at 49.8% of GDP, compared to 48.2% December 2022.
The survey specified that “after reaching minimum levels in 2013, the debt rose continuously as a proportion of GDP until 2019,” something it attributed to “fiscal reasons,” while specifying that this situation worsened “especially in 2020 due to the impact of the health crisis on public finances and economic activity.”
The UCU highlighted that in 2021 there was a reduction in the public debt in relation to GDP and in 2022 it rose again. However, looking to the future, he anticipated that “the deterioration recorded in the first half of the year would be corrected in the second half.” In this way, the total net debt of the State would return to around 48% of GDP.
Regarding this own estimate, the economist Javier de Haedo, author of the UCU report, considered a fiscal deficit of 3.8% of the GDP and expectations about CPI and the exchange rate from the latest BCU survey among analysts, noting that “they are relevant data for the purposes of determining the effect of changes in exchange parities on the debt.”
At the same time, he recalled that “the real appreciation of the national currency tends to ‘inflate’ both the numerator and denominator of the relationship between debt and GDP, when expressed in terms of dollars” and analyzed: “If figures expressed In dollars, as of June 30, the total gross debt of the public sector reached 51,705 million while the net debt (with the aforementioned definition) reached 37,611 million dollars.
Debt in national currency
When referring to the evolution of the proportion of the public debt total denominated in national currency (nominal pesos, UI, UP and UR), the survey attached a graph (see photo) and indicated that it is observed that “it rose over the last three and a half years, that is, during the current period of government.”
At the same time, he pointed out that “the high proportion of the debt that is denominated in national currency constitutes a kind of ‘insurance’ against an eventual depreciation” of the Uruguayan Peso.
And he compared that “unlike what happened, for example, at the time of the crisis at the beginning of this century, an abrupt jump in the exchange rate relative to the average prices of the economy would not have a greater impact on the relationships referred to between debt and GDP nor, therefore, on the solvency of the public sector.
Source: Ambito
