He global fiscal deficit In the moving year to November it stood at 4.0% of the GDP, three tenths below the previous month’s figure but clearly above that recorded at the end of last year. Taking the fiscal result of the non-monetary public sector, the deficit went from 2.2% to 3.6% in the last year (all this data without excluding the funds of fifty-somethings that arrive from the AFAPs).
As can be seen in the attached table, the increase in deficit is due to an increase in expenses which was clearly greater than the increase in income. This evolution of income and expenses has to do with the performance of the economy itself and also -particularly- with the Salary policy implemented in the last year.
In the case of income, let’s start by analyzing the two main “cashes” of the state: DGI and BPS. The collection of the DGI in the moving year to November was only 4% above that of the previous moving year in nominal terms, which – with inflation in the period that reached almost 6% – implies a royal fall of almost 2%. He brake on economic activity and the exchange difference with Argentina (which meant that many Uruguayans spent money in the neighboring country) are part of the explanation.
In the case of the BPS, on the contrary, given the increase in real wages and the increase in employment Incomes rose a healthy 9% nominal (almost 3% real). In the case of income from foreign trade The drop is significant and is due to the decrease in volumes sold in several products and also to the real drop in the dollar, the currency in which almost all foreign trade is transacted. There was also a significant drop in the primary result of state companies.
All this resulted in a nominal increase of 4% in the income of the non-monetary public sectorwhich implies a real drop of almost 2%.
Expenditures, for their part, increased in total by a nominal 9%, that is, an increase of almost 3% in real terms. This is due to the higher spending on passivities, which rose by 10% nominally, as well as an increase in expenses in remunerations, basically due to wage agreements in the state sector, which raised the wage bill by a nominal 11%.
There was also a real increase in transfers (to AFAPs, health insurance, etc.). Among them, stands out an increase of 18% in Family’s asignations and other active benefits. Part of these transfers are to organizations where the majority of the expenditure is salaries. It is worth remembering that of the general expenses of the Central administration plus the organizations of Art. 220 of the Constitution, more than 65% corresponds to salaries.
The general increase in expenditures occurs despite the fact that the investments Measurements in current pesos did not change, which implies a real drop of around 6%. The interests corresponding to the public sector debt non-monetary rose 9% nominal, that is, 3% real.
From all this it emerges – as indicated in the final line of the attached table – that the deficit went from more than 64,000 million pesos in 2022 to more than 110,000 million in the moving year to November 2023. increase of more than 70% in current terms or around 62% in real terms. According to official figures, the deficit of the non-financial public sector went from 2.2% to 3.6% of GDP.
Perspectives
The economy is expected to recover in 2024, after 2023 with almost no growth. This should lead to an improvement in the state accountsalthough it is difficult to project in what dimension.
If the impact of the price gap with Argentina decreases, and employment and real wages remain the same, a real improvement in the collection due to higher consumption.
On the other hand, we must also consider the impact that the drought: Although the direct impact of agriculture and agro-industries on revenue may not be large in the global figure, it is important in the indirect effect given its link with related services and – therefore – with consumption. With a recovered agricultural productionadded to other positive effects of water normalization, a certain improvement in public accounts can be expected.
However, the real increase in salaries, which automatically leads to a real increase in unemployment, will imply this year a real increase in spending in the two main lines of State expenditure. This will make it difficult for the fiscal result to have a significant improvement in effective terms. If the GDP rises, the deficit in relation to it should decline, but this is still difficult to ensure, at least in a substantial change that brings the deficit closer to 3% of GDP. Anything less would be a notable achievement.
Finally, it is worth mentioning that – although several changes have been made in the administration, at different levels, the general structure of the State has changed little and the components of salaries and liabilities continue to be the main thing. And if these expenses – typically non-tradable – expand, the price-competitiveness problem that already affects the Uruguayan economy. The State hopes that the economy will improve its accounts; the economy that the State facilitates growth.
Source: Ambito
