CPA Ferrere updated its projections for the Uruguayan economy and noted that salaries could have a negative correction due to the lower expected inflation.
The financial consultant CPA Ferrere presented the update of the economic perspectives, “The Uruguayan economy towards 2025”, and noted that the inflation converges towards a new comfort zone around 6%, despite the fact that the Consumer Price Index (CPI) It has been within the target range for twelve consecutive months, and with measurements even below the center of 4.5%.
The event was led by economists Alfonso Capurro —which also integrates the Fiscal Advisory Council (CFA) of the Ministry of Economy and Finance (MEF)– and Nicolás Cichevski. And although he touched on different points of the short and medium term projections for the country, the inflation was one of the issues that generated the most repercussions, as it was also one of the great objectives of the monetary policy of the Central Bank of Uruguay (BCU).
“The inflation reached historic lows in April (3.7%) and converges to a new comfort zone around 6%,” stated Capurro, in this regard. The April record was the lowest since August 2005, while the year-on-year figure would be below what some sectors expected.
High inflation despite the results
“New ‘comfort zone around 6%?’ But isn’t the goal 4.5%?” the economist asked. José Licandro, in social networks. “Ahhh…the expectations on the monetary policy horizon (24m) are set at 6%, despite that the monetary instance is neutral-expansive and the BCU’s own projections on its horizon are there,” he noted.
This has been one of the questions about the monetary policy of the BCU by the former mayor of Financial Services. In this sense, it is worth remembering that in the last Expectations Survey published by the Central Bank, the economic agents consulted corrected their inflation expectations upwards.
This coincides with another point of CPA Ferrere’s analysis that, despite the low dynamism of the economy in the leading indicators during the first quarter, predicts an acceleration of growth starting in the second quarter and an average annual growth of 3.4% in 2024. This improvement will be driven by a rebound effect in exports, but mainly by household consumption. The latter, with a prison effect on prices that would explain higher inflation levels than the current ones.
A negative effect on wages?
Capurro also emphasized that “for the first time in history we will have negative inflation correctives in the round of salary adjustments July of this year.” CPA Ferrere’s estimate points to an adjustment of -2.3%, while the inflation estimate for June would be 4.7%, while salary guidelines assumed 7.2%.
The economist explained that these negative correctives will not be automatic in all tables: some agreements explicitly provide for these correctives “in more and less” and will have automatic adjustments, as in the case of construction and domestic service; while other agreements only consider corrective measures if the actual price increase exceeds the expected inflation, or do not have clear wording on what treatment will be given to these cases, so there will surely be negotiation in the scope of the Salary Tips.
In any case, Capurro pointed out that “it is very positive that this is happening because in some way it means that the monetary politics “It was successful, it managed to break the inflationary inertia and outlines a new scenario for salary deindexation towards 2025.”
Source: Ambito
