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Potential GDP growth reduced to 2.5% annually until 2033

Potential GDP growth reduced to 2.5% annually until 2033

He growth potential of Gross Domestic Product (GDP) is 2.5% annually in the period 2024-2033, as specified by the Ministry of Economy and Finance (MEF), after the call of the Committee of Experts (CE).

In this way, the Potential GDP It fell 30 basis points compared to the previous measurement, from mid-2023, where 2.8% was estimated for 2023-2032. The reduction occurred due to the incorporation of the effective data for 2023 and the downward revision of 33% of the National accounts which was carried out by Central Bank of Uruguay (BCU) in February, despite the bullish bias of the CE, of a slight 0.06%.

In this way, the potential growth of the economic activity is the limit established for pillar 2 of the tax rule, which is the real increase in the primary expenses of the Central Government – ​​Social Security Bank (GC-BPS).

It is worth remembering that, as established by current legislation, the limit of the primary expenditure at 2.5% it begins to govern from 2025.

Specifically, the median for the variation of the gross fixed capital formation in 2023 it was 0%, but the effective figure was a drop of 7%, while the projection on the work force was 1.2% and the observed figure was 1.7%, explained by an increase in the number of employed people of 2.3%, offset by a reduction in the average hours worked and the average years of schooling, of 0. 2% and 0.4%, respectively.

Refering to total factor productivity, The median of the experts was 0.6% and the effective figure was a drop of 1.4%.

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The GDP gap could close in the short term

One of the members of the Committee of Experts is the CED economist, Ignacio Umpiérrez, who, through his account of GDP gap, which arises from the new estimate of potential growth and the review of the National Accounts, was estimated at 1% for 2022 and 2% for 2023.

“Therefore, given the expectations of effective growth, it would be very close to closing in 2024,” the specialist predicted for 2024 about what the economy will produce and what it can produce at its maximum capacity.

The CE is also made up of the following specialists: Martin Alesina (Ceres), Giuliano Cantisani (CPA Ferrere), Luciana Kosseda, Tamara Schandy and Matías Consolandich (both from Exante), Joaquín Torres and Ronald Miranda (FCEA) and Marcelo Sibille (KMPG). Meanwhile, specialists provided virtual assistance Ana Fostel and Jorge Roldós.

Source: Ambito

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