In the first month of the year, Javier Milei’s administration achieved a primary surplus of 0.2% and a trade balance in favor of almost 800 million dollars. He did so at the cost of tightening expenses, liquefying payments and with the collapse of imports due to the lack of dollars and the drop in consumption. Analysts point out that the trade balance will continue to be favorable due to the recession, but the primary outcome could get more complicated in the coming months.
The January trade balance, which recorded a surplus of 797 million dollarsfollowing a year-on-year growth in exports of 9.6% and a decline in imports of 14.3%.
Furthermore, Minister Luis Caputo recorded a primary surplus equal to 0.2% of GDP in the first month of the year and managed to record a financial surplus – resulting after paying interest on the debt – equal to 0.05% of GDP. It was the first time this goal had been achieved since mid-2012.
With this, at least in the first month of the year the twin leftovers returned. Néstor Kirchner was the last president who managed to sustainably maintain the twin surplus.
From the PPI they underline this “Doubts arise about the sustainability of these numbers through 2024since neither the liquefaction nor the curb on the flow of imports can be permanent.
For LCG “the data confirm the direction chosen by the Government, but they are still far from implying real progress”. The reason is that, according to the consultancy firm, “January’s primary surplus is largely explained by the slowdown in payments: The Treasury paid less than half of the obligations accrued during the month. The remaining debt amounts to $2 billion, an amount equivalent to the main result shown. Without this accounting effect, that is, the financial surplus would not have been such.”
In any case, in addition to intervening on the items, the Government applied a 39% cut in real spending by 30% in social benefits, including pensions, which have lost 38%.
For LCG, “the government’s push to promote fiscal convergence is still notable, but also the IMF itself during its visit to the country asked for greater application of the proposed changes so that can be perceived as sustainable over time and finish exploiting the foundations of growth.
For Salvador Vitelli, economist at Romano Group, for the rest of the year “The crucial issue will be fiscal rather than commercial. This type of trade we have contracts imports and exacerbates exports.”
Vitelli underlines that the Government”It will follow the path of fiscal surplus, but in the second half of the year it could become uphill, especially considering that a major component of the adjustment was the liquefaction of the lots. This means that they are not actually reshaping the entire spending structure, but rather Inflation is doing the dirty work. And this is not sustainable because it condemns you to live with high inflation.”
“It’s not always good to have twin surpluses, that’s a myth” warns economist Aldo Abram, of the Libertad y Progreso Foundation. “In this case there is a good part because the financial surplus is produced by good management of public accounts. In the other case it’s not good because It occurs due to a decline in consumption. I don’t see it as sustainable over time.“.
For Abram, “the objective should be to have external investments and capital inflows that allow financing a process of growth and investments, with the economy spending beyond its possibilities, but no longer financed by the Central Bank but by the private sector. Emerging countries that are doing well they tend to have trade deficits rather than surpluses“.
Source: Clarin
