The government will go to elections with the worst-case scenario in social matters in primary history since 2011. Three months out of PASO, most of the indicators that define the “economic vote” They drag on in a sharp deterioration and the room for maneuver to improve the situation of the electorate is very limited, according to a report by Ecolatina.
For the consultant, the main proof is that poverty is already there exceeds 40%, a record that not only represents the highest level for an election year, but is also the highest since 2005.
“This decline comes in the face of the rising inflation we estimate exceed 115% year-on-year in May, reaching significantly higher levels than in the rest of the election years (the highest since 1991, after the last hyperinflation),” stressed Ecolatina.
The price increase is 70 percentage points above the last election year (2021), 60 points above 2019 and 90 points above average annual inflation for the rest of the election years analysed, which showed an annual figure in a similar range .
“This dynamic gave birth to aa manifest weakening of real household incomeboth work and non-work,” the report adds.
On the one hand, the real salary is in 2023 at the lowest level in all election years, and this year would be the sixth consecutive fall. Since last peaking in mid-2017, the formal real wage is 19% lower through March and the informal real wage is 42%.
In turn, the living and mobile minimum wage lost 37% purchasing power compared to 10 years ago (2013 elections), the minimum pension 24% (also considering current obligations) and the Universal Child Allowance (AUH) 18%.
To this is added a “relative increase in rents. The formal sector real salary (RIPTE) -the best positioned- represents about 35% of the cost of renting a studio flat -the cheapest- in CABA, the worst figure compared to other previous elections, while in 2015 the rent represented 25% of income.
The social deterioration occurred despite an improvement in the labor market. Is that, although employment has increased, corresponded the largest number of new jobs in recent years informal and self-employment, which between 2019 and 2022 explained 72% of the employment generated.
This dynamic has accentuated the duality of the labor market between workers protected by equality and those dependent on state aid, which have reinforced the phenomenon of “poor worker”.
As for the private consumption, would be lower only than 2015 and 2017. However, after peaking in the third quarter of 2022, “a setback was observed in the last quarter of last year and we estimate that this decline has deepened in the first half of this year.”
The strong inflationary acceleration has generated a “pro-consumption bias”, which favors the rapid disposal of excess pesos, allocating them for consumption.
“In any case, even this “summer” of consumption began to find a ceiling at the end of 2022, in a framework in which economic policy has assumed a mainly contractionary orientation, with an adjustment of public expenditure in real terms which envisaged a haircut or reduction in benefits for many families (reduces disposable income for consumption) and a sharp increase in interest rates (makes credit more expensive),” Ecolatina indicated.
At the sectoral level, a deterioration can be observed:
* mass consumption -food, beverages and household and personal care items- is currently 12% lower than in 2015 or 5% lower than in 2017 (according to Scentia);
* vehicle patent it is 50% lower than the 2013 peak;
* consumer credit is 43% lower. that in that year;
* the purchase and sale of motionless goods in CABA and PBA it is 15% lower.
* and the purchase of household appliances and consumer electronics are about 20% lower than in 2017 (even more than in 2015).
Given this scenario, the government has incentives to improve purchasing power before the election. However, its margin is slim.
“THE severe shortage of foreign currency, combined with the instability of a high exchange rate gap and weak demand for pesos, they significantly limit the possibility of deepening the accumulated exchange rate lag or moving towards negative real interest rates, while the possibility of freezing public utility rates and/or accelerating spending in real terms collides with a lack of funding,” concluded Ecolatina.
Charles Arterburn is a seasoned business journalist for News Rebeat, where he provides comprehensive coverage of the latest trends and developments in the world of finance and economics.