According to a report by the Mediterranean Foundation, The Minister of Economy, Luis Caputo, is on track to achieve a financial surplus of 0.6% of the Gross Domestic Product (GDP) this year. In this context, the report says that the government would be one step away from achieving the objective of reducing public spending by the nation and the provinces to 25% of GDP, a goal included in the May Pact.
“The year 2024 could end with a financial surplus equivalent to 0.6% of GDPagainst a deficit of 6% observed in 2023”, the report says. This is a 6.6% improvement over last year. The projections would be achieved if spending and income continue to behave according to the usual seasonality.
The paper warns, however, that Typical spending in the last months of the year could be altered depending on possible concessions that the Executive Branch would have made to the governors, for the approval of the Bases Law.
“It is likely that during the negotiations for the approval of the Ley Bases, some commitments have emerged to moderate the fiscal adjustment in some items, especially those related to provincial governments, which could result in spending in the August-December period higher than that indicated by the typical seasonality of expenditures for that sub-period of the year,” the study indicates.
On the other hand The work says that “in 2024, interest on debts would fall significantly, not only because of the elimination of the fiscal deficit and a reduced need for public debt, but also because this year Treasury debt instruments have been issued that capitalize interest and are recorded as expenses only in the period in which the capital of the debt finally matures.”
One step away from fulfilling the May Pact
The report adds that with The fiscal adjustment observed in the Nation and the provinces “this year could end with consolidated spending around 32% of GDP, similar to what was observed between 1996 and 1998, in the middle of the nineties with the Convertibility Plan, or in 2007, in the following decade.”
“So, in one year the increase in spending observed between 2004 and 2023 will have been reduced by 70%. The weight of consolidated public spending went from 27% of GDP in 2004 to 47% in 2016. It rose 20 points of GDP in 12 years. Between 2016 and 2022, it fell 5 points of GDP,” the report says.
The Mediterranean states that “If the rest of 2024 expenditures are executed as in the first months of the year, consolidated spending could drop to 32% of GDP”. And it points out that “on average, between 1996 and 2024, the level of expenditure would represent 37.5% of GDP.”
However, the study prepared by economists Marcos Capello and Nicolás Cámpoli point out that the most likely scenario in the case of the provinces is that as 2024 progresses, the pace of spending adjustment will slow down.compared to what was observed in the first quarter, especially in terms of wage liquefaction.
“The goal of reaching an expenditure equivalent to 25% of GDP that was included in the May Pact would imply, in turn, returning to the level of expenditure observed in the Nation and Provinces in 2004, the year with the lowest weight of public expenditure executed in recent decades,” explains the study.
Source: Ambito
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