The IMF board approved the targets for the third quarter (July-September 2022) and authorized an outlay of approximately US$ 6,000 million. Although the directorate itself highlights progress in economic matters, it warns against macroeconomic imbalances. That is why the fiscal adjustment should prevail in 2023 (even if it’s in an election year) to meet the 1.9% of GDP primary fiscal deficit target. From this it can be deduced that the main adjustment items are social spending and economic subsidies. From a technical point of view, with the IMF, there would be cuts in real terms retired and pensions, salaries and transfers to the provinces.
Based on data from the Ministry of Economy, in November, the primary deficit it was $227.838 million (equal to 0.3% of GDP). Revenue increased 79.45% year over year. While, for his part, primary spending reached $1,650,330.7 million. In other words, primary spending increased by 77.9% year-on-year, below inflation. Being the latter (inflation), in November, it amassed 92.4% over the past 12 months. Like this, There are already 5 consecutive months with a drop in public spending (YoY) in real terms. Looking from January to November, the fiscal deficit reached 1.7% of GDP (excluding property income exceeding the ceiling of 0.3% of GDP) and the financial deficit (including interest on debt) was by 3.3% of GDP. In short words, there is still a margin of $563,000 million (equivalent to 0.8% of GDP) by December 2022. The numbers indicate a year end in line with the target set by the IMF. With a primary deficit of 2.5% of GDP.
The adjustment to 2023 to be able to lower the primary deficit from 2.5% to 1.9% of GDP it undermines what economic subsidies are (-0.6% of GDP) and social assistance (-0.8% of GDP). While sharpening the pencil, the fiscal adjustment has greater depth. It is worth mentioning that during 2022 the IMF has authorized the calculation of 0.3% of GDP from investment income (for the placement of CER bonds above par in the peso debt market). This accounting gimmick will not be part of the tools available for 2023. On the sidelines, in 2022, the extraordinary payment of personal income tax was expected for another 0.2% of GDP. In short words, the 2023 fiscal adjustment is expected to be 1.1% of GDP: from 3% of GDP to 1.9% of GDP. And the IMF, anticipating an election year and to anchor expectations, established, in the third revision of the agreement, that the primary deficit for the first half of 2023 will not be able to exceed 0.8% of GDP (1,100 billion dollars). .
The report of the organism is even more explicit. For example, high-income residential and commercial users, relative to utility rates (will adjust 0.6% of GDP in 2023), experienced a cumulative 60% reduction in gas and electricity subsidies between October and November 2022. And by February 2023, for that segment, which represents 25% of total users, energy contributions must be completely eliminated. For the middle and low income brackets, the expected adjustments are respectively 80% and 40% of the change in the coefficient of wage variation, starting next February. But the forced adjustment will be in the items of Social Assistance (0.8% of GDP), where the objective is not to grant extraordinary compensatory bonuses. Other items will also have adjustments in 2023, such as salaries (0.1% of GDP), transfers to provinces (0.1% of GDP) and pensions and pensions (0.2% of GDP).
In summary, for 2023 a decline in total revenues of 1.2% of GDP is projected, offset by the adjustment of public expenditure items which would total up to 1.8% of GDP. According to the projections, 2023 would be a year of stagflation, with growth slowing down (according to the BCRA’s REM, GDP growth would be only 0.7%) and with inflation remaining in the 90%/100 range % yearly. However, the IMF’s projection is in line with the official numbers. 60% inflation and 2% growth.
Federico Pablo Vacalebre is a professor at CEMA University
Source: Clarin
